Analysis

Israel Agrees on Trade Deal With South Korea That Excludes West Bank, East Jerusalem, Golan

Hours before a ceremony marking the agreement, Prime Minister Netanyahu's office announced that he would not be able to attend

South Korean cars at Eilat port.
Mori Chen

Israel and South Korea announced on Wednesday that they have completed negotiations on a free trade agreement. The pact will remove duties on some of the items traded between the two countries, but will not apply to East Jeusalem, the West Bank or the Golan Heights, areas beyond the country's 1967 borders.

As part of the agreement, Israel will rescind the 7% import duty on cars from South Korea, as well as the 12% import duty on refrigerators, consoles and video games, and machines for industry.

The Economy Ministry stated that as it does with exports to Europe, the state would offset the cost of customs duties that affect exporters from locations beyond the 1967 lines.

The agreement is slated to come into effect within a year. The announcement was made by South Korean Trade Minister Yoo Myung-hee and her Israeli counterpart, Economy Minister Eli Cohen.

Election season

This is a significant economic agreement, and good reason to celebrate, elections or no elections in Israel next month. Netanyahu considered going to South Korea to sign the agreement, but ultimately it was decided that he and the South Korean minister would sign together in Jerusalem. Ministers who live in the West Bank – including Bezalel Smotrich – said nothing.

Ultimately, though, this is election season, and the objections came from Kahlol Lavan MK Zvi Hauser, who was determined to paint himself as right wing. Hauser complained to the attorney general that the government couldn’t sign a binding agreement that ran contrary to its policy such a short time before the elections, especially given that the matter wasn’t urgent. Attorney General Avichai Mendelblit ruled that this wasn’t the case, as this was just an agreement to end negotiations, which didn’t force the government’s hand.

However, Netanyahu ultimately rethought his steps, and some four hours before the ceremony, the Prime Minister’s Bureau announced that Netanyahu wouldn’t have the time to attend. Instead, he’d meet the South Korean minister later in the day, and Eli Cohen would handle the agreement.

The agreement guarantees that some 95% of Israeli exports to South Korea will be exempted from import duties, making them more attractive within the South Korean market. The East Asian nation agreed to remove duties of 6.5% to 15% currently in place for Israeli imports.

The deal is also designed to ease provision of services and investments.

All told, Israeli exporters, importers and consumers should see a $100 million annual windfall from the agreement.

As of 2018, trade between Israel and South Korea totaled $2.5 billion, a 15% increase as of 2017. Israeli exports to South Korea include electronic equipment, fertilizer, medical equipment, cosmetics, plastics, juice and wine. South Korean exports to Israel include cars and car parts, refrigerators, medical equipment, electronic components, toys and games, plastics and chemicals.

Exclusion of areas beyond the 1967 borders

The exclusion of the West Bank, East Jerusalem and the Golan Heights is notable given the Israeli government’s policy of blocking discrimination against the settlements. Negotiations took three years due to the demand to exclude not just the West Bank but also East Jerusalem and the Golan, which unlike the West Bank, Israel has effectively annexed.

After Israel’s government realized South Korea was not backing down, the desire to achieve a trade deal surpassed the desire to advance Israeli settlements. Prime Minister Benjamin Netanyahu’s statement that the international status of the Golan Heights had changed during his term in office was cast aside.