82 Agreement between the European Economic Community and Israel- 11 May 1975- and statement in the Knesset by Foreign Minister Allon- 26 May 1975

82 Agreement between the European Economic Community and Israel- 11 May 1975- and statement in the Knesset by Foreign Minister Allon- 26 May 1975


 VOLUME 3: 1974-1977

82. Agreement between the European Economic Community and Israel, 11 May 1975, and statement in the Knesset by Deputy Premier and Foreign Minister Allon, 26 May 1975.

Israel was the first Mediterranean country to sign a major agreement with the EEC and in so doing paved the way for the opening of the vast Western European market to Israeli industrial goods and agricultural produce. By July 1977 all duties on Israeli industrial goods would be abolished. By 1989 European goods would enter Israel duty free. While the economic impact of the agreement was bound to be revolutionary for Israel, its political significance could not be overlooked; it was signed at a time when the members of the EEC were voicing pro-Arab views and attempting to coordinate their Middle Eastern policies, which, Israel felt, were no longer neutral, but, since October 1973 increasingly pro-Arab. Text of the agreement and Mr. Allon's explanation to the Knesset follow:

Agreement Between the European Economic Community and the State of Israel, 11 May 1975


THE STATE OF ISRAEL, of the other part,

DESIRING to consolidate and extend the economic relations established by the Agreements of 4 June 1964 and 29 June 1970 between the European Economic Community and the State of Israel and to ensure, with due regard for fair conditions of competition, the harmonious development of their commerce,

CONSIDERING that the Community is anxious to develop economic and trade relations with countries of the Mediterranean basin, and taking account of the desire of Israel to strengthen its economic links with the Community,

RESOLVED to this end to continue the progressive elimination of the obstacles to substantially all their trade, in accordance with the provisions of the General Agreement on Tariffs and Trade concerning the establishment of free trade areas, and to establish cooperation between the Contracting Parties on a basis of mutual advantage,

DECLARING their readiness to examine the possibility of developing and deepening their relations where it would appear to be useful in the interests of their economies to extend them to fields not covered by this Agreement,

HAVE DECIDED, in pursuit of these objectives and considering that no provision of this Agreement may be interpreted as exempting the Contracting Parties from the obligations which are incumbent upon them under other international agreements:


Article 1

The aim of this Agreement is: to promote through the expansion of reciprocal trade the harmonious development of economic relations between the European Economic Community and State of Israel and thus to foster in the Community and in Israel the advance of economic activity, the improvement of living and employment conditions, and increased productivity and financial stability;

- to promote cooperation in areas which are of reciprocal interest to the Contracting Parties;

- to provide fair conditions of competition for trade between the Contracting Parties;

- to contribute in this way, by the removal of barriers to trade, to the harmonious development and expansion of world trade.


Article 2

1. Products originating in Israel shall, on importation into the Community, be governed by the provisions of Protocol 1.

2. Products originating in the Community shall, on importation into Israel, be governed by the provisions of Protocol 2.

3. Protocol 3 lays down the rules of origin.

Article 3

1. No new customs duty on imports or charge having equivalent effect and no new quantitative restriction on imports or measure having equivalent effect shall be introduced in trade between the Community and Israel.

2. Charges having an effect equivalent to customs duties on imports introduced on or after 1 January 1974 in trade between the Community and Israel shall be abolished upon the entry into force of the Agreement.

Any charge having an effect equivalent to a customs duty on imports, the rate of which on 31 December 1974 was higher than that actually applied on 1 January 1974, shall be reduced to the latter rate upon the entry into force of the Agreement.

Article 4

1. No new customs duty on exports or charge having equivalent effect shall be introduced in trade between the Community and Israel.

2. Customs duties and charges having equivalent effect on products exported from one Contracting Party to the other shall be abolished in 1 July 1977.

Article 5

Articles 3 and 4 shall apply to products other than those listed in Annex II to the Treaty establishing the European Economic Community.

Article 6

1. A Contracting Party which is considering the reduction of the effective level of its duties or charges having equivalent effect applicable to third countries benefiting from most-favoured-nation treatment, or which is considering the suspension of their application, shall, as far as may be practicable, notify the Joint Committee not less than 30 days before such reduction or suspension comes into effect. It shall take note of any representations by the other Contracting Party regarding any distortions which might result therefrom.

2. In the event of amendments to the nomenclature of the customs tariffs of the Contracting Parties affecting products referred to in the Agreement, the Joint Committee may adapt the tariff nomenclature of these products in the Agreement.

Article 7

1. In the event of specific rules being established as a result of the implementation of its agricultural policy or of any alteration of the current rules or in the event of any alteration or extension of the provisions relating to the implementation of the agricultural policy, the Contracting Party in question may amend the arrangements resulting from the Agreement in respect of the products which are the subject of those rules or alterations.

2. In such cases the Contracting Party in question shall take due account of the interests of the other Contracting Party. To this end the Contracting Parties may consult each other within the Joint Committee.

Article 8

The Agreement shall not preclude the maintenance or establishment of customs unions, free trade areas or arrangements for frontier trade, except in so far as they alter the trade arrangements provided for in the Agreement, in particular the provisions concerning the rules of origin.

Article 9

The Contracting Parties shall refrain from any measure or practice of an internal fiscal nature establishing, whether directly or indirectly, discrimination between the products of one Contracting Party and like products originating in the territory of the other Contracting Party.

Products exported to the territory of one of the Contracting Parties may not benefit from repayment of internal taxation in excess of the amount of direct or indirect taxation imposed on them.

Article 10

Payments relating to trade in goods and the transfer of such payments to the Member State of the Community in which the creditor is resident or to Israel shall be free from any restrictions where such trade is covered by the provisions of the Agreement.

Article 11

The Agreement shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security, the protection of human, animal or plant life and health, the protection of national treasures of artistic, historic or archaeological value, the protection of industrial and commercial property, or rules relating to gold or silver. Such prohibitions or restrictions must not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between the Contracting Parties.

Article 12

The following are incompatible with the proper functioning of the Agreement in so far as they may affect trade between the Community and Israel:

(i) all agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition, as regards the production of or trade in goods;

(ii) abuse by one or more undertakings of a dominant position in the territories of the Contracting Parties as a whole or in a substantial part thereof;

(iii) any public aid which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods.

2. Should a Contracting Party consider that a given practice is incompatible with this Article, it may take appropriate measures under the conditions and in accordance with the procedures laid down in Article 16.

Article 13

Where an increase in imports of a given product is or is likely to be seriously detrimental to any production activity carried on in the territory of one of the Contracting Parties and where this increase is due to:

- the partial or total reduction in the importing Contracting Party, as provided for in the Agreement, of customs duties and charges having equivalent effect levied on the product in question; and,

- the fact that the duties or charges having equivalent effect levied by the exporting Contracting Party on imports of raw materials or intermediate products used in the manufacture of the product in question are significantly lower than the corresponding duties or charges levied by the importing Contracting Party;

The Contracting Party concerned may take appropriate measures under the conditions and in accordance with the procedures laid down in Article 16.

Article 14

If one of the Contracting Parties finds that dumping is taking place in trade with the other Contracting Party, it may take appropriate measures against this practice in accordance with the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, under the conditions and in accordance with the procedures laid down in Article 16.

Article 15

If serious disturbances arise in any sector of the economy or if difficulties arise which could bring about serious deterioration in the economic situation of a region, the Contracting Party concerned may take appropriate measures under the conditions and in accordance with the procedures laid down in Article 16.

Article 16

1. In the event of a Contracting Party subjecting imports of product liable to give rise to the difficulties referred to in Articles 16 and 15 to an administrative procedure, the purpose of which is to provide rapid information on the trend of trade flows, it shall inform the other Contracting Party.

2. In the cases specified in Articles 12, 13, 14, 15 and 25, before taking the measures provided for therein, or, as soon as possible in cases to which paragraph 3(d) applies, the Contracting Party in question shall supply the Joint Committee with all relevant information required for a thorough examination of the situation with a view to seeking a solution acceptable to the Contracting Parties.

In the selection of measures, priority must be given to those which least disturb the functioning of the Agreement.

The safeguard measures shall be notified immediately to the Joint Committee and shall be the subject of periodical consultations within the Committee, particularly with a view to their abolition as soon as circumstances permit.

3. For the implementation of paragraph 2, the following provisions shall apply:

a) As regards Article 12, either Contracting Party may refer the matter to the Joint Committee if it considers that a given practice is incompatible with the proper functioning of the Agreement with the meaning of Article 12(1).

The Contracting Parties shall provide the Joint Committee with all relevant information and shall give it the assistance it requires in order to [examine] the case and, where appropriate, to eliminate the practice objected to.

If the Contracting Party in question fails to put an end to the practice objected to within the period fixed by the Joint Committee or, in the absence of agreement in the Joint Committee, within three months of the matter being referred to it, the Contracting Party concerned may adopt any safeguard measures it considers necessary to deal with the serious difficulties resulting from the practice in question; in particular it may withdraw tariff concessions. (b) As regards Article 13, the difficulties arising from the situation referred to in that Article shall be referred for examination to the Joint Committee, which may take any decision needed to put an end to such difficulties.

If the Joint Committee or the exporting Contracting Party has not taken a decision putting an end to the difficulties within 30 days of notification of the matter, the importing Contracting Party shall be authorized to levy a countervailing charge on the product imported. The countervailing charge shall be calculated according to the incidence on the value of the goods in question of the tariff disparities in respect of the raw materials or intermediate products incorporated therein.

(c) As regards Article 14, consultation in the Joint Committee shall take place before the Contracting Party concerned takes the appropriate measures.

(d) Where exceptional circumstances requiring immediate action make prior examination impossible, the Contracting Party concerned may, in the situations specified in Articles 13, 14 and 15 and also in the case of export aids having a direct and immediate incidence on trade, apply forthwith such precautionary measures as are strictly necessary to remedy the situation.

Article 17

Where one or more Member States of the Community or Israel is in difficulties or is seriously threatened with difficulties as regards its balance of payments, the Contracting Party concerned may take the necessary safeguard measures. It shall inform the other Contracting Party forthwith.


Article 18

1. The Community and Israel shall, as a factor complementary to trade, institute cooperation in spheres which are in the mutual interest of the Contracting Parties.

2. To this end, the Joint Committee shall seek ways and means of promoting the development and diversification of trade, facilitating the transfer of technological knowhow, and encouraging private investment and contacts and cooperation between the industries of the Community and Israel.

3. The Joint Committee is empowered to make recommendations with a view to implementing one or more of the measures referred to in paragraph 2. The examination of such measures must be undertaken case by case and be subject to the existence of some mutual interest for the Contracting Parties.

4. The Contracting Parties may, as a factor complementary to trade, develop economic cooperation in spheres which are of mutual interest to them, taking into account developments in the Community's economic policies.


Article 19

1. A Joint Committee is hereby established which shall be responsible for the administration of the Agreement and shall ensure its proper implementation. For this purpose, it shall make recommendations and take decisions in the cases provided for in the Agreement. These decisions shall be implemented by the Contracting Parties in accordance with their own rules.

2. For the purpose of the proper implementation of the Agreement, the Contracting Parties shall exchange information and, at the request of either Party, shall hold consultations within the Joint Committee.

3. The Joint Committee shall formally adopt its own rules of procedure.

Article 20

1. The Joint Committee shall consist of representatives of the Community on the one hand, and of representatives of Israel on the other.

2. The Joint Committee shall act by mutual agreement.

Article 21

1. Each Contracting Party shall preside in turn over the Joint Committee, in accordance with the arrangements to be laid down in its rules of procedure.

2. The Chairman shall convene meetings of the Joint Committee at least once a year in order to review the general functioning of the Agreement. The Joint Committee shall, in addition, meet whenever special circumstances so require, at the request of either Contracting Party, in accordance with the conditions to be laid down in its rules of procedure.

3. The Joint Committee may decide to set up any working party that can assist it in carrying out its duties.

Article 22

1. In accordance with the procedure adopted for negotiating the Agreement, the Contracting Parties shall review the results of the Agreement on the basis of the experience gained during its functioning and of the objectives defined therein and consider any improvements which could be made. This review shall take place first from the beginning of 1978 and again from the beginning of 1983 and any improvements adopted shall operate from 1 January 1979 and 1 January 1984 respectively.

2. Should Israel need to slow down its tariff dismantling programme, the Contracting Parties may decide, when reviewing the industrial sector, to extend, on mutually agreed conditions, the time limits set out in Article 1 (2) of Protocol 2. These limits relate to the rates of reduction of 30% and 80% respectively. Neither time limit may be extended by more than two years.

The tariff dismantling programme referred to in Article 1(2) of Protocol 2 shall be completed by 1 January 1989 at the latest.

Article 23

Nothing in the Agreement shall prevent a Contracting Party from taking any measures:

(a) which it considers necessary to prevent the disclosure of information contrary to its essential security interests;

(b) which relate to trade in arms, munitions or war materials or to research, development or production indispensable for defence purposes, provided that such measures do not impair the conditions of competition in respect of products not intended for specifically military purposes;

(c) which it considers essential to its security in time of war or serious international tension.

Article 24

In the fields covered by the Agreement:

- the arrangements applied by Israel in respect of the Community shall not give rise to any discrimination between the Member States, their nationals, or their companies or firms;

- the arrangements applied by the Community in respect of Israel shall not give rise to discrimination between Israeli nationals, companies or firms.

Article 25

1. The Contracting Parties shall refrain from any measure likely to jeopardize the attainment of the objectives of the Agreement.

2. They shall take any general or specific measures required to fulfil their obligations under the Agreement.

If either Contracting Party considers that the other Contracting Party has failed to fulfil an obligation under the Agreement, it may take appropriate measures under the conditions and in accordance with the procedures laid down in Article 16.

Article 26

1. Where a Contracting Party considers that it would be useful in the common interest of the Contracting Parties to develop the relations established by the Agreement by extending them to fields not covered thereby, it shall submit a reasoned request to the other Contracting Party.

The Contracting Parties may instruct the Joint Committee to examine this request and, where appropriate, to make recommendations to them, particularly with a view to opening negotiations.

2. The agreements resulting from the negotiations referred to in paragraph 1 will be subject to ratification or approval by the Contracting Parties in accordance with their own procedures.

Article 27

The Protocols annexed to the Agreement shall form an integral part thereof.

Article 28

Either Contracting Party may denounce the Agreement by notifying the other Contracting Party. The Agreement shall cease to apply 12 months after the date of such notification.

Article 29

The Agreement shall apply, on the one hand, to the territories to which the Treaty establishing the European Economic Community applies under the conditions laid down in that Treatv and, on the other, to the State of Israel.

Article 30

This Agreement is drawn up in duplicate in the Danish, Dutch, English, French, German, Italian and Hebrew languages, each of these texts being equally authentic.

This Agreement will be approved by the Contracting Parties in accordance with their own procedures.

It shall enter into force on the first day of the second month following the date on which the Contracting Parties notify each other that the procedures necessary to this end have been completed.

The Agreement of 29 June 1970 between the European Economic Community and the State of Israel shall cease to be applicable on the same date.


Mr. Allon's Statement:

Mr. Speaker, Members of the Knesset,

Yesterday, 25 May, the cabinet unanimously ratified the economic agreement signed in Brussels, on 11 May, between the European Economic Community and the European Coal and Steel Community and the State of Israel. On 14 May, the agreement was ratified, unanimously, in the plenum of the Parliament of Europe in Strasbourg.

The signing in Brussels and the two ratifications, in Strasbourg and in Jerusalem, spell the successful termination of the long path of crystallizing and shaping the agreement which represents the most comprehensive, and possibly also the most significant, of the economic alliances Israel has signed to date.

It now remains to look forward to and prepare for the agreement's entering into force - on 1 July 1975.

Members of the Knesset,

I shall not enter into details - they fill an entire volume, and you will find some of them in the brochure tabled in the House. I shall list only the three principal components of the agreement with the Common Market:

a. Establishment of a free trade zone for industrial products. That is to say abolishment of the tariff walls on Israel's industrial exports to members of the Community within two years, by 1 July 1977, and conversely, a gradual decrease of tariffs on industrial imports into Israel from members of the Community within 14 years, by 1 January 1989.

b. Significant tariff reductions on 85 percent of the range of agricultural exports from Israel to members of the Community.

c. A chapter on cooperation between members of the Community and Israel, including encouragement of capital investments, transmission of technological information and industrial and scientific cooperation. The agreement also includes a clause forbidding discrimination, aimed at forestalling the Arab boycott. An identical clause is expected to be included also in the agreements to be concluded by the Community with the rest of the Mediterranean countries.

The major and primary significance of these seemingly dry clauses, is the opening to Israel's export goods of the gates of one of the largest and most developed economic blocs - a bloc which is in fact a continent, with a population of over 250 million, enjoying an advanced standard of living and a high level of consumption, which, in Israeli concepts at least, is of an unlimited purchasing capacity. Today already the European community our neighbour across the Mediterranean - occupies pride of place in Israel's foreign trade. Approximately half of Israel's imports - some two billion dollars in 1974 - come from this bloc, and above a third of Israel's exports - some 700 million dollars in 1974 - are sent there.

The prospects the agreement opens to the Israeli economy are, thus, great and even spectacular. But these will not be realized of themselves. No lesser are the challenges with which the agreement confronts us, and the dangers we shall face if we fail to meet these challenges. Dangers graver by far, however, would have been our lot had we not proceeded along this path. By the very nature of technological and economic development, the world is gradually forming into large economic blocs - which also partake of a political nature. Had we, heaven forfend, remained on the sidelines of this development, isolated economically in and by ourselves, we could well have found ourselves - in the not too distant future - cut off from the mainstream of development, to the extent of lagging and stagnation.

The agreement, therefore, provides us with the big opportunity - but the question of whether and how we exploit this opportunity depends on us: Whether we succeed in making use of the opening of the gates of the European markets to Israeli products as a large lever for the development and improvement of the economy, for rendering it more efficient, and for its promotion to the front rank of the world's industrial countries. Or, heaven forbid, whether the opening of our gates to European goods should find in Israel an economy unprepared for the contest, which will lose out in the open competition with foreign goods.

We have admittedly succeeded in including in the agreement a lengthy period of time for the economy's adaptation to the new situation, and it does make allowance for infant industries. The decrease in tariffs on our imports from the members of the Community is, as aforementioned, gradual and spreads over many years, but these years must not be allowed to go by in idle anticipation and inertia. On the contrary: During this period of adaptation, we will all - employees and employers alike, labour and management, and of course, the government, the Histadrut and the economic organizations - have to make a supreme effort to render enterprises more efficient and raise their productivity, to improve the quality of goods and reduce the cost of their production. In short - to transform the Israeli economy from an economy still existing, to a great extent, under hothouse conditions, to a modern and efficient economy, capable of withstanding the onslaught of the competition of European goods. This is essential for maintaining our economy and society at the standards to which we aspire - and this is possible, depending only on our capacity to organize and prepare for it properly.

Mr. Speaker,

The agreement we have signed with the European Community is in content and essence an economic agreement - but it is not lacking in political significance, and no negligible political significance at that. I do not recommend that we exaggerate the weight of this significance. The agreement does not mean that the nine members of the Community have suddenly altered their Middle East policy, or that the differences of opinion - at times wide ones -between us and them concerning the manner of solving the Arab-Israeli conflict, have been eliminated overnight. We are still a long way from that. But in the same degree the political significance of the agreement must not be written off or scorned - all the more so in the special circumstances and conditions of our time.

If, in the face of the efforts of the Arab states to exacerbate and intensify the economic warfare against us, the members of the Community have decided - each one separately and all of them together - to substantially broaden the bridge between us and the European economies, and to conclude with us an agreement which is the first of its kind - a certain importance attached to this. If, despite their dependence on Arab oil and their zeal to tighten their relations with the Arab states, the nine found the courage and the ability to withstand the Arab pressure - unlike their affrightened declaration of 6 November 1973 - the fact has a certain weight, and perhaps also something portentous for the future. For when all is said and done, the positive, final and determining decision on the agreement was taken not in financial institutions, but in clearly political institutions of the Community and its members.

In terms of political significance this is, at the very least, a step countering the Arab states' aspiration to isolate Israel among the nations of the world - and as such it may perhaps serve to prod to some extent the quota of realism among our neighbours, that same realism which is an essential condition for the processes of acknowledgment and coexistence in the region.

We are aware, of course, of the fact that the Community is striving to reach broad agreements with additional Mediterranean countries - including Middle Eastern Arab states. This is natural, understandable, and we have nothing against it. From the economic aspect, we have reached understanding in principle with the Community, that if the anticipated agreements with the other Mediterranean countries should include more convenient terms for the latter, these terms will apply to us as well - with the exception of the three Mahgreb countries, which, as former French colonies, were already promised special terms in the Treaty of Rome.

From the political angle, with a hopeful look to the future, the tightening of relations between the European Community and Israel on the one hand, and between the European Community and the Arab states on the other, might possibly, in the course of time, also indirectly contribute somewhat to the forging of relations between us and our neighbours.

And this is without mentioning the positive inspiration derivable from the experience of Europe, which has succeeded in freeing itself from the hostilities of the past and from the sediment of the wars of yesteryear, and in mounting the path of understanding and cooperation.

The agreement which will enter into force in about five weeks' time did not, as is known, come to us easily or in one day. It is the fruit of lengthy and stubborn effort of the governments of Israel, of Israel's economic ministries, and of the Israeli foreign service, over a period of 17 years. If you will, this is a success story of vision, foresight and unwearying consistency. We have traversed a long and tortuous path since Israel submitted the first memorandum to the Community's representation in Brussels, in October 1958, only a year and a half after the signing of the Treaty of Rome. The chief mileposts on this path were: First, the signing of the Trade Agreement in June 1964, which, while its economic significance was admittedly very limited, was yet in the nature of the establishment of a first foothold in the Community, and a kind of lever for what was to come. Secondly, the Preferential Agreement of June 1970, which granted more significant customs reductions by stages for most of our industrial exports to Europe, as against more limited customs reductions on our part. And finally, there is the last agreement, which forms the subject of today's agenda, which is in fact a broad agreement for the establishment of a free trade zone between us and the Community.

I shall not list the multiple difficulties that faced us on this long path. They are more or less known, as is the special effort made by Israel's foreign service in the last ten months in all the capitals of the nine - and not only in them - in order to overcome the course of obstacles - political and other - on the way to the signing of the final agreement on 11 May. Ahead of us, in the near future, there is also resumption of contacts with the Community's institutions on extension of the cooperation clause and on the financial protocol, which may well open the common market's financial institutions to us, thereby complementing the economic agreement already signed.

But I wish to re-emphasize: For all the importance attaching to the agreement signed two weeks ago in Brussels, this is not the final milestone on our path to tightening to the maximum our ties with the European Economic Community, to achieving full and complete cooperation between us and the Community. Our objective was and is to reach an agreement that will grant us the status of full Associate Membership in the Community the closest status the treaty of Rome permits a non-European state. We did not conceal this objective in all our contacts with the Common Market, and we also indicated it during the signing ceremony in Brussels.

This objective, too, like our previous interim objectives, is not within easy grasp just around the corner. To attain it, too, we shall have to labour hard. But we have grounds for hoping that if we do indeed succeed in properly exploiting the opportunities the recent agreement opens before us, and if we are able successfully to integrate ourselves in the orbits of the Community to the extent that the agreement permits - we shall finally attain this objective as well.

We can draw encouragement for' this from the resolution passed in the Parliament of Europe on 14 May, a resolution which stated explicitly that only association - namely, associate membership - will be able to satisfy the mutual interests of the Community and Israel. And this, without mentioning the encouraging statements we have heard in this regard from a series of European statesmen who helped us achieve the recent agreement.

Members of the Knesset,

In its resolution of 14 May, the Parliament of Europe in Strasbourg recommended, and expressed its hope for, the establishment of a close and permanent contact between itself and the Knesset. I am persuaded that the House will show great interest in this hope one which is undoubtedly common to us as well - and that it will find the appropriate means for its realization.

To conclude: Even if we regard it from a minimal aspect, it is impossible not to view the new agreement between us and the European Community as an important achievement - an achievement the significance of which is all the greater precisely because of the difficult times we are living in today. And I deem it a pleasant duty to extend, from the Knesset rostrum, sincere thanks to all our friends in Europe, and to all those who engaged in the task on the Israeli side since we began to weave our ties with the Community, for the contribution they made to this achievement.

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