New Pact Lifts Duties on Israeli Imports of Canadian Foodstuffs

Expanded trade deal also allows Israeli industry freer access to the Canadian market

Benjamin Netanyahu and Justin Trudeau shake hands during a meeting in Davos, Switzerland, January 24, 2018.
Amos Ben Gershom/GPO

The expanded Canada-Israel Free Trade Agreement that took effect Sunday eliminated or reduced tariffs on the import into Israel of a wide range of foods from Canada.

Tariffs were eliminated on importing into Israel from Canada fresh apples, garlic, onions, pears and potatoes; baked goods, berries, dried fruit, spices, wine, canned fruit and vegetables and frozen vegetables.

The modernized Canada-Israel Free Trade Agreement, known as CIFTA, also provides for lower tariffs on imports of Canadian fish, meat and cheese into Israel.

Now that the modernized CIFTA has gone into force, Israeli industry will also enjoy freer access to the Canadian market to sell products including cookies and other baked goods, fresh fruits and vegetables and processed food including carrots, cherry tomatoes, fresh spices, citrus fruit and juice and wine.

The modernized pact also includes new provisions addressing such issues as labor and environmental protection, gender protections, electronic commerce, small and medium-sized businesses.

“The modernized CIFTA signals the importance of inclusive trade and ensuring that the benefits and opportunities that flow from trade and investment are widely shared,” the Canadian government website stated.

For Israel, many of the provisions are a first in a trade agreement.

“Through two phases of negotiations in 2014-2015 and 2017-2018, Canada and Israel updated four chapters and added nine new chapters to the CIFTA,” a Canadian government website noted.

“Since CIFTA first came into effect over two decades ago, Canada’s two-way merchandise trade with Israel has more than tripled, totalling $1.9 billion in 2018 [U.S.$1.4 billion].”

Ohad Cohen, who heads the Foreign Trade Administration at the Economy Ministry, noted that 65% of Israel’s foreign trade is now conducted by means of free trade agreements.

“Canada is one of Israel’s best friends,” he said, and the new agreement “will open additional opportunities to this large market. In addition, the agreement will broaden the range of possibilities that the Israeli consumer has for imported products.”

Israeli consumers might ask themselves whether the new trade provisions will mean lower prices at the retail level. It’s not clear. When it comes to other trade liberalization steps in Israel in recent years, importers and retailers have pocketed most of the savings from lower customs duties. In some instances, they passed along nothing to the customer. Retailers in some instances have even raised the retail price of imported goods to match the higher price tag of comparable Israeli-made products.

The only way that the government could ensure that lower duties would be passed on to the consumer is by providing duty-free allocation of products to retailers who commit to charging the lowest cost to their customers, as the Israeli government currently does with fresh meat and hard cheese, but that requires a lot of bureaucracy and it’s not clear that the Economy and Industry Ministry is set up to supervise every duty-free food import in this way.

Last year, the total merchandise trade between Israel and Canada was about U.S. $1.1 billion. Israel sold a record amount to Canada last year and had a positive trade balance with the Canadians.

Israeli exports to Canada include mainly chemicals, machinery, optical and medical instruments, rubber, plastic and food products. Israeli imports from Canada include diamonds and precious metals and, in a mirror image, also machinery, chemicals, food and optical and medical instruments.

The original CIFTA agreement from 1997 reduced tariffs on manufactured good but left many tariffs in place on fresh and processed food. One of the main aims of the new agreement was to benefit trade in food.