Trade with Israel – what it means for UK farming

The UK government launched its FTA (Free Trade Agreement) negotiations with Israel on 20 July 2022.

The UK and Israel already have a preferential trade agreement (the UK-Israel Trade and Partnership Agreement) which was rolled over from the UK's membership of the EU.

Israeli market and consumers

Israel is an advanced market-based economy with a GDP per capita of $44,168 (USD) similar to the UK’s GDP per capita of $41,059. With a small population of 9.39m, Israeli consumers are generally willing to pay more for high quality products.

There is an increasing demand for organic and 'natural' foods which the UK is well placed to supply with its highly respected food safety and traceability rules.

Israel currently accounts for 0.36% of the UK’s combined trade in agri-food and drink products. In 2021 the UK exported £109m of agri food and drink and imported £142m from the region.

Sector opportunities

Dairy – Israel is around 85% self-sufficient in dairy products and its tariffs remain prohibitively high across many categories of dairy products. However, the UK has a strong market foothold in Israel, exporting £2.5m worth of dairy products to Israel in 2021. Unfortunately, the UK has access to very limited Israeli TRQs, for example an 89t duty free quota for butter and 113t duty free quota for cheese. Trade in both butter and cheese exceeded those quotas in 2021. The NFU would like to see the removal of these remaining tariffs and quotas to help grow our exports.

Cereals – the UK is a significant supplier of worked cereal grains – predominantly oats – to Israel, which benefits from duty free access. We also have a healthy growing trade in malt, flours, and other products of the milling industries. Many Israeli tariff lines for cereals are already liberalised. However, duty free TRQs remain in place for durum wheat (1,449t), other wheat and meslin (25,992t) and feed wheat (40,860t). Out of quota, the duties are 50%. The NFU is calling for the removal of all remaining tariffs in the cereals sector and to expand the tariff free quota.

Horticulture – there are still significant Israeli tariff protections across the horticulture sector such as prohibitive tariffs on cabbage, cauliflower, beetroot and other brassicas of 75% and 213% on carrots, turnips, salad beetroots and other edible roots. Meanwhile the UK has rolled over several inbound TRQs on imported Israeli products such as new potatoes (9,689t) and sweet peppers (2,349t). Israel utilises all of our TRQs which were rolled over with significant fill rates of 75% for new potatoes and 93% for sweet peppers over 2018-21. Concessions around the UK’s prized horticulture market must only be granted if our entire agri-food sector can access reciprocal gains.

Sugar – Israel is among the UK’s top three non-EU customers for sugar. In recent years, volumes have fluctuated, but in 2018 the UK exported almost £7.5m worth of sugar to Israel. Maintaining access to this market should be a top priority for UK negotiators.

Feedback

We would welcome feedback from any members with experience or knowledge of trade with Israel. Please email [email protected] with your thoughts.

The consultation closed on 30 March 2022.

The NFU submitted a full response which you can read here: NFU position on an enhanced trade deal with Israel

In our response we noted the opportunity for UK agricultural produce presented by Israeli consumer preference for high quality, high value products, as well as growing demand for organic and niche foods backed up by high food safety and proven traceability systems.

With 99.5% of the value of UK exports to Israel on average between 2018 and 2020 already liberalised, we explained that the government should seek to negotiate the removal of all remaining tariffs, particularly relating to UK exports of dairy products, wheat and horticulture products including apples and pears, cherries and peas.

Concessions around the UK’s prized horticulture market must only be granted if our entire agri-food sector can access reciprocal gains.

We noted that it should be a matter of priority for negotiators to acquire recognition and protection of UK Geographical Indications (GI), particularly from within our dairy sector.

We said that diplomatic efforts, either within the context of enhanced trade talks or in parallel, must be made to address concerns surrounding ongoing technical barriers to trade, such as Israel’s new food labelling system.

The Department for International Trade opened its consultation on a prospective free trade agreement with Israel on 1 February 2022.