Trade Talks May See Israelis Drinking California Wines and Eating American Hummus

Documents show Washington’s demands for big increases in duty-free quotas for 40 different product categories

A woman shops at a greengrocer, March 13, 2019.
\ Ilan Assayag

As Prime Minister Benjamin Netanyahu and the cabinet were dedicating the future Golan town of Trump Heights this week, farmers from the Golan Heights and the Galilee were on hand to protest demands of the Trump White House to ease restrictions on imports of American agricultural products.

What those demands are is anyone’s guess. U.S. and Israeli trade negotiations have started discussing Washington’s demands, but Israel’s Agriculture Ministry, which is holding the talks together with the treasury, is refusing to say what they are.

“We’re not interested in responding because the release to the public of any of the particulars during the negotiations would hurt the interests of the State of Israel,” the Agriculture Ministry said in a statement on Tuesday.

However, TheMarker has obtained a document detailing U.S. demands and they include about 40 different categories, not all of them strictly farm products.

If Washington gets its way, Israelis could be drinking more California wines and cooking with butter from Wisconsin. Prices would likely fall for many products, but the fallout could be severe for Israeli growers, not only on the Golan and the Galilee but for other areas of Israel as well.

Growers warn that if farmers are hurt by an onslaught of American imports, it could hurt communities in critical areas like the Golan (where Trump Heights is slated for a largely agricultural area) and around the Gaza Strip.

Washington is seeking to ease access to Israel for U.S. farm products as part of its wider trade strategy of opening up overseas markets.

The status quo right now favors Israel: Israeli farmers can export however much they want to the United States, and their products are not subject to import duties there. However, Israel controls how much American produce is imported to Israel, limiting the quantities with quotas, as is the case for all imported produce in Israel.

At the Trump Heights dedication ceremony, guests were served imported American apples. If Washington has its way, that will be just the beginning, according to the documents seen by TheMarker.

Israelis today consume about 135,000 tons of apples a year, of which 120,000 are grown domestically. The United States is currently entitled to export 4,000 tons to Israel duty-free, but negotiators are seeking to more than triple that to 13,000 – a figure equal to more than 10% of the local market.

European countries and others around the globe also export apples to Israel, which will add to the price pressure from an increase in the U.S. quota.

Pears are a much smaller market of just 30,000 tons annually. Right now Israeli growers account for 25,000 tons of that and American growers can export 1,300 tons duty-free. But the U.S. wants to boost that to 4,000 tons.

The list of products seen by TheMarker includes processed foods as well. One of the biggest categories is cheese, with American asking to boost their duty-free quota to 10,000 tons, 90% of it hard cheese.

As it is, Israel opened the cheese market to more foreign competition last year and duty-free imports reached 6,000 tons, most of it from Europe. That smaller level of imports, however, had a profound effect on consumer prices, which fell 10% last year. A surge in U.S. imports would bring prices down further but hurt local makers like Tnuva and Strauss.

It would also hurt the Israeli government, which collects about 70 million shekel ($19.4 million) annually from duties on cheese, which run at 7.40 shekels a kilogram.

The U.S. wants to increase its quota for duty-free butter exports to Israel to 850 tons from 300. The Israeli market is 6,000 tons annually, half of which is imported and a higher American quota would undoubtedly lower prices.

About a fifth of the five million liters of wine Israeli drink every year is imported, but it comes mostly from Europe and to a lesser extent South America and Australia. American negotiators are seeking a duty-free quota of 600,000 liters, which would have a major impact of the supply-demand balance.

Other small product categories that are being discussed as well. One is an increase in the duty-free quota for carp to 1,000 tons annually, three times the level now and equal to a third of the local market. Quotas for hummus, which many Israeli regard as a national dish, would be increased to 2,000 tons in a country that consumes about 30,000 tons annually.