WORLD TRADE
ORGANIZATIONWT/TPR/M/58
19 October 1999
(99-4511)
Trade Policy Review Body
14 and 16 September 1999
TRADE POLICY REVIEW
ISRAEL
Minutes of Meeting
Chairperson:  H.E. Mr. Jean-Marie Noirfalisse (Belgium)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3
II. OPENING STATEMENT BY THE REPRESENTATIVE OF ISRAEL 4III. STATEMENT BY THE FIRST DISCUSSANT 6IV. STATEMENT BY THE SECOND DISCUSSANT 9V. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 11VI. REPLIES BY THE REPRESENTATIVE OF ISRAEL AND
ADDITIONAL COMMENTS 15
VII. CONCLUDING REMARKS BY THE CHAIRPERSON 24ANNEX I ADVANCE WRITTEN QUESTIONS 26WT/TPR/M/58
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I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The second Trade Policy Review of Israel was held on 14 and 16 September 1999.  The
Chairperson welcomed the delegation of Israel, led by Dr. Reuven Horesh, and the discussants,
Ambassador Ömer Ersun (Turkey) and Mr. Sándor Simon (Hungary).  As usual, both discussants
would speak in their personal capacities and not as representatives of their countries.  In accordancewith the established procedures, the discussants had made available, in advance, outlines of the main
issues they intended to raise.
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures for the meeting.  The report by the Government of Israel was contained in document
WT/TPR/G/58 and that of the WTO Secretariat in document WT/TPR/S/58;  the main issues to be
raised by the discussants were contained in document WT/TPR/D/38.  Copies of advance written
questions, submitted by nine delegations (Australia;  Canada;  Colombia;  the European Union;Hong Kong, China;  Hungary;  Japan;  the Republic of Korea;  and the United States) (Annex I) had
been transmitted to the delegation of Israel.  If full replies could not be provided during the meeting,
supplementary written replies could be provided later.WT/TPR/M/58
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II. OPENING STATEMENT BY THE REPRESENTATIVE OF ISRAEL
3. The Government of Israel welcomed the opportunity to review recent developments in the
Israeli economy and its trade policy in the framework of the Trade Policy Review Mechanism.  Since
the beginning of the 1990s, Israel had undertaken reforms in the areas of trade and foreign exchange
liberalization, the reduction of state subsidies and budget deficit, deregulation, and privatization. Thestrategy had been to create the necessary conditions for economic growth by refraining from direct
intervention in the economy, while simultaneously seeking to encourage increased efficiency and
competition through the liberalization of the economy.  These reforms had had a significant effect on
the performance of the Israeli economy and its international trade relations.  Israel would continue to
implement policies aimed at creating a more efficient and outward-looking economy.
4. After completing free-trade agreements during the 1980s with two major trading partners - the
EC and the United States - Israel’s trade policy had been aimed at enhancing trade liberalization at themultilateral level, while continuing to expand its network of bilateral free-trade agreements.  Foreign
competition through bilateral agreements had paved the way to liberalization and greater exposure
vis-à-vis other WTO Member countries.  Free-trade agreements had been a complementary tool to the
multilateral trading system.
5. The unilateral trade liberalization programme on industrial imports, launched in April 1991,
had resulted in a drop in MFN tariffs on most products from a maximum of 75% to rates ranging
between zero and 12%, and the remaining duties on imports of textile products would be reduced to a
maximum of 12% by September 2000.  The specific component in the tariffs applied to industrial
products would be eliminated, thereby enhancing transparency in the tariff system.  Regarding
agricultural products, in January 1996, Israel had initiated tariffication and liberalization of the sectorin accordance with its Uruguay Round commitment as well as part of the overall liberalization of the
economy.  With regard to processed agricultural products, the objective was to reduce duties
gradually beyond its WTO commitments and reach by 2004 a maximum MFN tariff rate of 12% on
the industrial component (in addition to a specific duty on the agricultural component).
6. As a result of Israel’s trade liberalization policies, imports from non-preferential trading
partners increased by 92% during 1993-98, while imports from free-trade partners increased by
only 33% over the same period.
7. As part of its liberalization policy and commitment to the multilateral trading system, Israel
had participated actively in the ITA, even though Israel already benefited from tariff-free treatment on
its main markets.  Israel also actively participated in the negotiations on basic telecommunications and
financial services; its commitments in these areas reflected an open and liberal policy.
8. Since April 1998 the foreign currency control regime had been almost fully liberalized; all
foreign currency restrictions on households and businesses had been abolished, except for a short list
of restrictions on institutional investors (provident funds, pension funds, and insurance companies)
and on some derivatives transactions of non-residents. The change had enabled residents to enjoy
complete freedom to engage in transactions with non-residents in both foreign and local currency.
The measure had increased competition, thereby reducing financing costs.  It had also encouragedforeign investment and opened new channels for investment abroad and for domestic savings.  The
financial system was highly developed and stable, as successfully demonstrated during the crisis in
Asia and in Russia.  The financial system was tightly supervised in order to protect customers and
maintain confidence in the system.
9. An essential element of the broader structural reforms over the past years had been the move
towards privatization in order to promote private sector growth.  Between 1986 and 1998, the
Government had sold all or a portion of its share in 77 companies and banks with total receipts of
US$7.3 billion, of which 50% had been raised over the last two years.  Although privatization andWT/TPR/M/58
Page 5
deregulation efforts had been far reaching in terms of sectoral coverage, the process was still to be
completed.
10. During the last five years, Israel had substantially reduced its incentive schemes in line with
its overall policy of reducing Government involvem ent in the economy.  Subsidies and capital grants
to the Israeli business sector as a share of GDP had been reduced from 2.6% in 1993 to 1.3% in 1998.
11. One of the key features of Israel’s internal trade policy had been reform of the standards
policy.  In January 1998, a major revision had been made in the Standards Law in order to limit the
use of mandatory standards to protection of public health, safety and environment or strictly necessary
cases of consumer protection.  The Standards Law would be further amended to ensure the adoption
of new, and alignment of existing, Israeli standards to international standards.
12. Israel regarded an open government procurement market as part of its policy objective of
promoting competition.  In this context, Israel decided to join the Government ProcurementAgreement (GPA).  However, experience had shown that Israel still faced serious difficulties in
participating in other GPA member countries' tenders.
13. Within the WTO framework, Israel remain ed committed to meeting its implementation
obligations.  Regarding TRIPS obligations, Israel would have appropriate legislation in place by
1 January 2000;  a bill was before the Parliament and was expected to pass its second and thirdreadings before the end of 1999.  Regarding enforcement of intellectual property rights, a number of
initiatives had been taken to raise the awareness of the public, police, prosecutors, and judges.
Moreover, a newly established police unit dedicated to intellectual property rights protection started to
operate in May 1999.  With regard to imports, the Customs Authority was examining ways and means
of establishing a data base to improve information and to facilitate action against piracy.
14. The liberalization and deregulation policies have had a positive impact on Israel’s economy.
GDP per capita in 1998 reached US$16,400.  Between1990 and 1998, annual GDP growth averaged
5%.  Growth was due to several developments, among them the immigration of 880,000 people from
the former Soviet Union and the resulting increased domestic demand; the Middle East peace process;
the implementation of the liberalization policy and structural reforms; and the growth of high value-added industries.  Annual growth , however, slowed to 2% in 1998 and 1999.  This slowdown, coupled
with an increase in unemployment to 8.6%, was the result of cyclical factors, a decrease in the number
of immigrants, the global financial crisis, as well as restrictive financial policies.  Spurred by a
renewal of the peace process, it was expected that growth would increase in 2000.
15. In light of the renewal of the peace process, Israel expected that political considerations
would no longer be carried over to the economic and trade arena, thereby conflicting with WTO
principles of non-discrimination.  Israel remained committed to open markets, to an outward looking
economy, to integration into the world economy, and to a rule-based multilateral trading system.WT/TPR/M/58
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III. STATEMENT BY THE FIRST DISCUSSANT
16. The first discussant (Ambassador Ömer Ersun) noted that Israel, although often classified as
an emerging market, had many characteristics of an advanced economy.  Since its establishment
in 1948, Israel had experienced strong economic growth allowing its rapidly growing population to
enjoy increasing standards of living.  With a GDP of nearly US$98 billion in 1998 and per capitaGDP of US$16,400, Israel's economy was highly industrialized and diversified.  Its workforce was
exceptionally well educated and skilled.  Its high technology products reflected the strength of its
manufacturing sector.  The public sector continued to play an important role in the Israeli economy,
although its active participation had gradually diminished over the last decade.
17. After some years of rapid growth in the firs t half of the 1990s (annual average growth of
4.7% between 1990 and 1994), the economy started to overheat.  The previous expansionary policies
were replaced by tight monetary and fiscal policies, resulting in a  fall in inflation (preliminary 1999data of consumer price inflation of 2.2%) and an improved current account deficit (0.9% of GDP).
18. As many other countries, Israel had been affected by the recent Russian financial crisis.  The
Israeli currency suffered a sharp depreciation, which in turn caused concern among Israeli businesses
with net exposure in foreign currency credit.  The Bank  of Israel had been forced to raise interest rates
in order to stabilize the currency.  The currency gained stability and had actually appreciated byapproximately 8% in 1999.  On the other hand, economic growth was reduced (annual growth of 2%
in 1998 and 1999) and unemployment had increased.  He emphasized the volatility of short-term
foreign capital investments, and pointed out that there may be a risk in depending on high domestic
interest rates in attracting short-term investment.  He was interested to know about the new
Government’s plans to stimulate the economy.  In view of the deflationary pressure, he asked if thenew Government intended to modify the Deficit Reduction Law of 1996, which required an annual
decrease in the domestic budget deficit.
19. Israel, with a relatively small sized domestic market, was highly dependent on foreign trade
for its development; in 1998, trade in goods and services accounted for over 70% of its GDP.  By
taking advantage of its competitiveness in high technology products, Israel had demonstrated itsability to achieve export-oriented growth.  The steady increase in exports had been impressive, rising
from US$5.5 billion in 1980 to US$23 billion in 1998.  Imports consisted mainly of production inputs
(69% of total imports in 1998) and investment goods (close to 17%).  During the 1990s rapid
economic growth accelerated imports, and the trade deficit rose to 8.7% of GDP in 1995.  However,
imports had since levelled-off as a result of slowing growth as well as improved terms of trade.
20. Within the framework of the commitments unde r the Uruguay Round, Israel would: bind 53%
of all tariff lines; reduce the tariff by 24% over five to ten years; replace most quantitative restrictionson agricultural products with tariff rate quotas;  limit domestic support to agriculture by 12% in value;
and cut agricultural export subsidies by 12% in value.  Under its WTO commitment, Israel had
amended its legislation on customs valuation and standards.  Israel had also made a number of
commitments under the GATS, and it undertook further commitments in the Agreements on Basic
Telecommunications, and Trade in Financial Services, and in the Declaration on Trade in InformationTechnology Production. Israel had invoked developing country status regarding the TRIPS
Agreement.  Israel was also a signatory to the Government Procurement Agreement.
21. The bulk of Israel's trade was conducted within the framework of free-trade agreements. Free-
trade agreements had come a mean to greater integration in the global economy and a complementary
tool to the multilateral system.  Under the U.S.-Israel free-trade agreement, with the exception ofsome agricultural and processed food products, all duties on U.S. products were eliminated on
1 January 1995.  In late 1996, the United States and Israel agreed on a five-year programme of
agricultural liberalization.  Under the Agreement with the EU, all goods except agricultural products
were traded duty free.  The free-trade agreements with other countries (the EFTA, Canada,WT/TPR/M/58
Page 7
Czech Republic, Hungary, Poland, Slovak Republic, Slovenia and Turkey) provided for either
immediate or phased reduction of tariff duties  on industrial products, and tariff concessions on
agricultural products.  The preferential agreement with Jordan provided for reciprocal concessions on
a number of products.
22. The foreign investment regime constituted probably the most liberal aspect of the trade policy
regime of Israel;  most activities in Israel were open to foreign investors.  The Government had
actively encouraged foreign private investment - especially in industries based on exports, tourism,
and high technology - with large incentives, including reduced taxation, investment grants or
guaranteed loans.  These incentives had been instrumental in motivating major international
companies to make direct investments in Israel.  All benefits available to Israelis were available to
foreign investors.  Moreover, the Government prov ided foreign-owned companies with even greater
incentives, thereby discriminating against local-owned companies.  Foreign direct investment, whichamounted to US$3.5 billion in 1997, had been an important factor in Israel's economic development
during the 1990s.
23. The agriculture sector accounted for less than 3% of the GDP.  Israel was self-sufficient in
many agricultural products (such as fruit, vegetables, poultry, eggs, and dairy products) and competed
successfully in certain export markets (citrus fruit, more recently, other agricultural fresh productssuch as cut flowers, fresh fruit, avocado, and cotton).  The share of farm products in total merchandise
exports had declined from 16% in 1980 to 6% in 1998.  To overcome constraints in terms of water
availability and cultivable land, subsidies had been extended to the sector.  However, subsidies to the
farming sector had been curtailed in the recent years; subsidies to output in 1997 accounted for about
half of their 1994 level.  Under the Agreement on Agriculture, Israel could provide export subsidies toa number of agricultural products.  However, in the 1997-98 calendar year, it granted export subsidies
to only cut flowers (US$1 million).  The discussant  asked for details on the policies regarding market
access improvements that had taken place within the context of the Uruguay Round commitments,
preferential trade agreements, and through unilateral trade liberalization.  He was also interested to
know about any plans to simplify the highly complex tariff structure.
24. The objective of Israel’s industrial policy was to create a competitive environment for the
private sector, focused on high-technology industry.  The comparative advantage of Israel's industrial
development consisted of an extremely skilled workforce supported by a very strong infrastructure of
science and technology.  Israel spent over 2.5% of its GDP on R&D, and a large part of the total
outlays on the state aid system (8.4% of GDP in 1996) benefited manufacturing.  The performance of
the knowledge-intensive high-technology sector was impressive; its share in manufacturing
production had risen from 24% in 1994 to about 30% in 1998.  Over the same period, the traditionallabour-intensive industry's share had decreased from about 37% to 35%.  The high-technology
industries had lower than average protection tariff  rates, whereas the slow-growing traditional
industries appeared to be protected by higher than average tariffs.  He asked whether this reflected
Israel's comparative advantage in capital-knowledge intensive goods.
25. Most manufacturing imports entered Israel under preferential rates, while imports from other
sources were subject to moderately low tariff rates (a verage MFN rate of 6.6%).  Therefore, tariffs, in
general, did not constitute significant barriers for manufacturing imports.  But Israel had other
measures that effected trade and production of manufactured products, including strict enforcement of
technical regulations (food, beverages, tobacco, textiles, clothing, and leather products) and licensing
requirements (concentrated in transport equipment, leather products, some food products, and animalfeeds).
26. The structure of the economy had gradually shifted towards services away from agriculture
and manufacturing.  Substantial progress had recently been realized in liberalizing the financial sector.
For example, the foreign currency liberalization in May 1998 eliminated almost all restrictions on
capital flows.  Recent measures allowed residents to open accounts with overseas banks and to buyWT/TPR/M/58
Page 8
foreign currency and overseas assets without limit.  On the other hand, pension funds and insurance
companies were not allowed to invest overseas.  Also the profits of investors were taxed at different
rates when earned from securities investments in foreign capital markets versus the domestic market.
Banking was highly concentrated and the Government owned most of the assets.  The Government
was in the process of undertaking a comprehensive reform of the banking sector with the objective ofenhancing competition and improving the regulatory framework.  Other subsectors of services such as
insurance, air and maritime transportation, and tourism were generally open to competition.
27. Liberalization in telecommunications had brought about tangible benefits.  Israel's
telecommunication sector had moved from a monopolistic to a more competitive structure.  Following
a fundamental policy change, the government-owned company Bezeq's exclusivity rights in supplying
international telephone services were terminated and new operators were allowed to enter the market.
Companies were entitled up to 74% ownership in international service providers. Consequently, joint-venture companies had been established with exclusivity rights until 1 January 2002.  As a result of
increased competition, Israeli consumers had benefited from a sharp decrease in prices of
international telephone and cellular services.  He asked the Israeli delegation about any new initiatives
with respect to further liberalization.WT/TPR/M/58
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IV. STATEMENT BY THE SECOND DISCUSSANT
28. The second discussant (Mr. Sándor Simon) stated  that since its previous Trade Policy Review,
Israel had made important legislative, regulatory, and practical steps towards a more open,
transparent, and liberal trading system.  Through its bilateral free-trade agreements and unilateral
liberalization programme, as well as through the implementation of its WTO commitments, Israel hadactively contributed to the stability of the multilateral trading system.
29. Transparency had improved, but efforts should be intensified to create a higher degree of
predictability and security for trading partners and in vestors;  this included easier access to legislation
and regulations, especially in the fields of tariffs, government procurement, standards, and state aid.
30. Despite significant liberalization in the industrial sector, overall tariff protection for
agricultural products had increased substantially due to the "tariffication" process; in some cases the
tariffs seemed to have a prohibitive nature.  The application of non- ad valorem  duties on 14% of the
tariff lines (mainly on agricultural and textile products), the low level of binding, the introduction of
seasonal tariffs, the use of safeguard and variable import levies, as well as the continued application
of the end-use provisions made the tariff system more complex, and less transparent and predictable.
He was interested to learn about the prospects for the simplification of the tariff system and any plan
for further reduction and/or elimination of the safeguard levy.  He was also interested to know if Israelhad any intention to reduce the difference between the MFN applied tariffs and the bound rates, which
introduced a significant element of uncertainty for the business community.
31. Import prohibitions were related to public morals, health, and safety, as well as security
considerations;  the list of products had been stable and the system was transparent.  However, since
the last Review, Israel appeared to maintain a ban on imports of non-kosher meat and meat products,while there was a limited domestic production, sale, and consumption of those products.  He asked for
comments from the Israeli delegation in this regard.
32. Since the last Review, Israel had disinvoked the balance-of-payments provisions, eliminated
most of its import quotas, and substantially reduced the tariff lines subject to import licensing
(from 1,877 to 836 tariff lines).  He asked whether this trend would continue.
33. While there was no state trading in Israel's imports, five agricultural product categories could
be exported only by, or on behalf of, the Government.  He asked whether there were any plans to
change the system.
34. The Standards Law had been amended in 1998 so that mandatory standards could be
introduced only under strict conditions, mainly for health and safety reasons.  As a consequence,
250 standards were changed from mandatory to voluntary.  However, only about one quarter of
mandatory standards were equivalent to international standards, and the items subject to technicalregulation had increased from 31.5% to 39.4%.  He asked whether there were any prospects for
increased alignment of domestic norms with international standards.
35. Government procurement purchases represente d 12% of Israel's GDP, of which 15% were
contracted to foreign-based companies in 1998.  Transparency and predictability had been enhanced
by codifying the existing preferences.  On the other hand, the mandatory offset arrangement at 35% ofthe contract value seemed to be burdensome.  He asked whether there were any plans to accelerate the
phasing-out period of this arrangement.
36. The TRIPS Agreement allowed developing countr ies to implement certain provisions for the
protection and enforcement of intellectual property rights up to 1 January 2000; Israel had invoked
developing country status in this regard.  He was interested to know about the status ofimplementation of the Agreement.  One of the most problematic areas seemed to be enforcement,WT/TPR/M/58
Page 10
which was lagging behind the legislative process.  It would be useful to hear details about the
experience gained so far from the establishment of the special police unit to investigate possible
intellectual property rights violations, and what additional measures could be taken to speed up the
enforcement capacity.
37. While the privatization programme was increasingly important, the role of the State remained
significant, especially in the area of the complex and costly (8.4% of the GDP in 1996) state aid
system.  Moreover, retail prices under government control constituted 18% of the consumer price
index.WT/TPR/M/58
Page 11
V. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
38. Members appreciated Israel’s strong commitment to the WTO, and its continuing efforts to
move towards a more open trade and investment policy regime.  Members thanked the Government
and the Secretariat for their reports.  Members also looked forward to receiving replies to their
advanced written questions.
39. The representative of Australia welcomed Israel’s continued efforts to liberalize its economy,
particularly in the areas of customs valuation, foreign direct investment regime, and the aligning of
Israeli standards to their international counterparts.  Referring to the high dependence on subsidies,
cheap water, and protected markets, he raised concerns over intervention in the agriculture sector.  He
also noted the potential distortion in trade resulting from preferential trade agreements and
encouraged Israel to use these arrangements to liberalize all trade and to ensure that third parties did
not lose out from the formation of such agreements.
40. The representative of Hong Kong, China noted th at it was important for Israel to avoid trade
diversion from most sources.  He looked forward to Israel's continued support for a more liberal
trading environment and active participation in the forthcoming round of multilateral trade
negotiations.  He was pleased to note Israel’s reforms in the area of customs valuation including the
move towards the transaction valuation procedure and the implementation of the modernized customssystems.  Recognizing Israel’s move towards an open and liberalized tariff regime within the
framework of free-trade agreements, he looked fo rward to further liberalization that would bring
benefits to all Members.  Regarding cabotage measures in the maritime services, he hoped that these
would be granted on an MFN basis.
41. The representative of the Republic of Korea noted that legislative changes were in the process
of being implemented to bring Israel's legislation into conformity with its obligations under the
Uruguay Round.  He asked for more information on these changes.  Regarding safeguard levies, he
asked why Israel favoured the imposition of a safeguard levy not in conformity within the meaning of
Article XIX of the GATT 1994, and how Israel’s safeguard levies were different from the
aforementioned Article.  He also asked whether the Government was considering rendering itssafeguard levies compatible with the spirit of GATT Article XIX.
42. Israel’s regional trade agreements had contributed to the lowering of the average customs
duty paid.  However, he hoped that Israel would be able to extend the benefits of these regional trade
agreements to third parties while minimizing their potential negative effects.
43. The representative of Hungary welcomed the tight monetary and fiscal policies that had been
implemented to address the overheating of the economy.  As a result, the trade and current account
balances had improved and inflation had been brought down.  During the review period, a series ofimportant reforms had been carried out.   However, state intervention was still significant.  He asked
whether the Government had any plans to streamline the costly and complex state aid system.
44. Turning to trade policy, he complimented th e Government for modernizing its customs
valuation regime, including the abolishment of the "harama" system.  Moreover, the coverage of the
safeguard levy had decreased.  However, the rate of this levy depended on the country of origin.  Hewas interested to hear on what legal basis the different treatment was provided, the economic rational
behind it, and the criteria under which measures were imposed.  He welcomed the amendment of the
Standards Law so that mandatory standards could be introduced only under strict conditions and that
mandatory standards were increasingly based on international standards.  However, only 25% of the
mandatory standards were fully in line with international standards. Under Israeli law, certaingovernment tenders included an offset requirement amounting to 35% of contract value.  This
requirement had caused problems for Hungarian companies. He urged the Government to accelerateWT/TPR/M/58
Page 12
the cutting of the ratio and asked for information on the timetable and staging of the offset ratio’s
decrease.
45. Despite the positive changes in certain sectors, agriculture remained heavily protected.  Tariff
protection in farming was high, on average, and exporters of certain agricultural products faced
prohibitive tariffs.  Imports of non-kosher meat and meat products were banned, while theGovernment permitted domestic production, sale, and consumption of non-kosher meat.  He asked for
further details on this measure.
46. The representative of Canada congratulated Israel on its economic performance and the
Government’s focus on economic stabilization.  Its liberal trade agenda had featured an aggressive
pursuit of free-trade agreements, contributing to an attractive investment climate.  Israel had emerged
as an economic force, carving out a knowledge-based niche and driving technological advances.  She
commended Israel’s pursuit of trade liberalization in the midst of an economic slowdown.  However,areas remained where barriers inhibited trade, particularly in the agri-food sector.  She asked about the
opportunities for expanding market access for agricultural products.
47. The representative of Japan noted that Israel had formed free-trade areas with a number of
countries, and only about a quarter of Israel’s total imports were subject to MFN tariffs.  He urged
Israel to improve the coverage of the bound rates, which may constitute a trade barrier to Israel’s non-preferential trading partners.  Referring to the new Treaty of Association between Israel and the EU,
he asked for clarification on the difference between the former agreement and the new Treaty.  The
Agreement on Government Procurement (Article XIX:5) obliged each party to collect and provide
data on an annual basis on its procurements covered by the Agreement.  He requested Israel to
implement this obligation.  Turning to services, he appreciated Israel’s active participation in the basictelecommunications and financial services negotiations.  He also commended Israel’s efforts for
further liberalization, such as the opening of its lo cal telecommunications market to full competition
in 1999, which was two years in advance of its GATS commitments.  He asked whether there were
any limitations for foreign capital in the privatized companies.
48. The representative of the European Communities encouraged Israel to continue to respond to
external pressures through domestic reform and liberalization of trade and investment opportunities.
Reforms in the areas of privatization and competition policy should be continued.
49. Israel was well placed to take advantage of further liberalization of non-agricultural tariffs.  In
this regard, he welcomed information on Israel's intentions with respect to the forthcoming Ministerial
meeting and subsequent multilateral negotiations.  Only just over half of Israel's tariffs were bound.
Certainty for businesses would be enhanced if Israel were to bind the entire tariff.
50. He welcomed Israel's continued commitment to encouraging foreign direct investment in the
services sector, and looked forward to further libera lization in the fields of tourism, and international
and wireless telecommunications.  The EU also encouraged Israel to complete the review of its
incentive schemes; while successful in attracting investments, the incentives may have contributed to
economic distortions, and to problems with the bala ncing of the budget.  Further reforms in the state
aid system and in liberalizing consumer prices may be found indispensable to reviving economicgrowth.
51. He was heartened that Israel honoured its commitments under the WTO in those areas where
it had benefited from a transition period under the invoked developing country status.  The alignment
of customs valuation methods to WTO norms and to international standards would be as important in
attracting foreign trade and investment as tariff levels or regulation of the services industry.  Notingthat Israel had already modernized its customs valuation legislation and improved import clearance
procedures, he welcomed confirmation of Israel's support for initiatives on trade facilitation in the
forthcoming multilateral negotiations.WT/TPR/M/58
Page 13
52. Israel would complete its good track record for honouring WTO commitments by ensuring
adherence to the TRIPS Agreement and its effective enforcement by 1 January 2000.  As noted in the
Secretariat Report, this area has been a matter of concern to some of Israel's trading partners.
53. A network of preferential agreements was not contradictory to a commitment to the
multilateral system.  Evidence of this was found in Israel's determination to meet its commitments andactive participation in the WTO.  In this respect, he welcomed and encouraged Israel's commitment to
the forthcoming multilateral negotiations.  He was interested to hear Israel’s view on this.
54. The representative of Turkey noted that since the previous Review, Israel’s economic policies
had successfully focused on curbing inflation, and reducing the trade and current account deficits.
Israel was highly dependent on trade for its economic development; foreign trade accounted for more
than 70% of GDP.  Referring to the Secretariat Report, he asked for clarifications on the statement
that the authorities were debating whether to extend their preferential rates on an MFN basis.  He alsoasked whether the high tariff protection in agriculture protected the sector from foreign competition,
and whether the sector was better or worse off in terms of productivity, level of production, and
product diversification.
55. The representative of United States noted that the U.S.-Israel free-trade agreement was the
United States’ only bilateral free-trade agreement outside North America.  He welcomed the actions
undertaken by Israel since its 1994 Review to effect greater liberalization, including efforts to
modernize its customs valuation and standards regimes.  He commended Israel for its participation in
the ITA.  On the basis of this progress, he encouraged Israel to continue along the path of greater
openness, including decreasing the role of the State.  In some areas, there was a need for further
progress in ensuring full implementation of Israel’s WTO commitments, particularly the TRIPSobligations.  The United States also believed that  a transparent and predictable services trade regime
would be an important boost to Israel.  Increased ac tivity and trade in services was a means to lessen
demand on national and municipal budgets and generate infrastructure improvements.  He noted that
in the sectors that Israel had begun to liberalize, the regime in general did not yet meet the standards
for transparency, predictability or openness provided by many WTO Members.  He also raisedconcerns regarding Israel’s import prohibition on non-kosher meat.
56. The representative of India noted that Israel had fully implemented its autonomous import
liberalization programme of industrial (excluding textiles) products.  This was achieved despite the
fact that there was a slowdown in the econonomy.  However, as a result of the tariffication process,
MFN tariff protection for agricultural products in Israel had more than doubled during 1993-99.
Israel had placed a strong emphasis on free- or preferential-trade agreements and, since its last
Review, had significantly expanded its network of free-trade agreements;  it would be important to
avoid any risks of trade diversions.  He asked about Israel’s experience of participation in
free/preferential-trade agreements and how the proliferation of such agreements contributed to the
strengthening of the multilateral trading system.
57. Overall, trade and cooperation between India and Israel had grown.  However, there were
some areas of concern regarding access to the Israeli market.  Indian pharmaceutical products andcertain chemicals had not been able to make inroad s into the Israeli market due to difficulties in
registering these products.  Another area of concern was that while tariffs on most products had been
scaled down, garments, which was of major interest to India, faced high tariffs of 38-39%.  Indian
agricultural and food items, including seafood, also attracted restrictions on imports into Israel.
Moreover, severe restrictions were being placed on Indian software specialist, engineers, etc.  Herequested Israel to address these market access restrictions.
58. The representative of New Zealand acknowledged the positive changes that had taken place in
the areas of customs valuation and standards.  With regard to the latter, he encouraged Israel to
continue efforts to align its mandatory standards with relevant international ones.  New Zealand sawWT/TPR/M/58
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further growth potential in a number of areas, including dairy and agricultural products.  He was
interested to know about any plans to address the issues of the high tariffs on agricultural products,
and the way in which kosher requirements were applied to meat imports.  He hoped that the
restrictions imposed on the imports of fruit from tropical and sub-tropical climates would be resolved
in 1999.
59. The representative of the Slovak Republic encouraged Israel to continue the development of
its legal structures and procedures under its Uruguay Round commitments.
60. The representative of the Czech Republic noted that Israel had implemented important trade
related reforms since its previous Review, including the abolition of import restrictions for
balance-of-payments reasons, reduction of the coverage of import licensing, completion of the
unilateral import liberalization programme on industrial products, and meaningful contribution to the
negotiations on ITA, basic telecommunications, and financial services.  Nevertheless, he wasconcerned about the extensive import restrictions on some agricultural and food products as well as
the gap between bound and applied tariffs on these products.  He sought clarification on WTO
justification for the imposition of safeguard levies, and asked whether there was any plan to eliminate
the remaining levies.  Acknowledging Israel’s tremendous efforts to align its mandatory standards
with international standards, he requested details on fu ture reforms in this area.  He also asked for the
justification for the unequal treatment between exporters and importers with regard to the use of ports
and stevedores.
61. The representative of Norway noted that protectionist measures had been gradually reduced
and competition issues had received increased attention as border protection had gone down and
privatization moved ahead.  Regarding maritime, he asked whether any of Israel’s agreementscontained cargo sharing clauses or any other form of restrictions with regard to market access for
vessels from third-country parties.  He also asked under what conditions manning subsidies were
granted and whether these subsidies had had any effect on keeping the Israeli-owned fleet under
Israeli flag.  He also sought information on whether there were any limitations on foreign direct
investment for ships that fly the Israeli flag.  Before introducing cabotage based on the principle ofreciprocity, Norway urged the authorities to consider it carefully.  Finally, he wondered whether there
were any limitations or restrictions for foreign participation with regard to the transportation of
government cargoes in Israel, and whether the national carrier Zim enjoyed any privileges with
respect to government cargoes.
62. The representative of Switzerland raised concerns about the gap between applied and bound
tariff rates.  He encouraged Israel to observe the 1 January 2000 deadline for implementation of its
TRIPS commitment.WT/TPR/M/58
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VI. REPLIES BY THE REPRESENTATIVE OF ISRAEL AND ADDITIONAL
COMMENTS
63. The replies by the representative of Israel were divided into three main themes:  (i) economic
environment;  (ii) trade policies and measures;  and (iii) sectoral policies.  They were based on written
responses, which were circulated to Members.  Israel would provide further answers in written formwithin the time allowed under the TPRM.  Following  the replies, the Chairperson opened the floor to
TPRB members for further comments and questions.
(i) Economic environment
64. The representative of Israel stated that Israel’s main economic goals were to increase the
growth rate and lower unemployment, while contai ning inflation and maintaining economic stability.
In light of these goals, the Government rega rded the slowdown in the economy and the rising
unemployment as two of its major problems.  Resources should be directed towards creating afavourable economic atmosphere, achieved through stability, a decline in the budget deficit, lower
interest rates, investment in infrastructure, structural reforms and progress in the peace process.
65. Regarding the draft budget for 2000, the Government proposed an amendment to the Deficit
Reduction Law to limit the budget deficit (excluding credit) in fiscal year 2000 to 2.5% of GDP;
reduce it in 2001 and 2002 such that each year there would be a reduction of at least 0.25 percentagepoints;  and to reduce the total deficit to a maximu m of 1.5% of GDP for 2003.  With respect to the
composition of the Budget, significant funds were allocated for infrastructure as a growth-support
component.  The Government had also approved a list of eighty structural measures, to make the
economy more competitive, and encourage private-sector activity.
66. Israel’s regional development programme, as implemented under the Encouragement of
Capital Investment Law, was aimed at disadvantaged areas.  Regions were determined to be
disadvantaged on the basis of unemployment rates, population density, distance from the center of
Israel and other socio-economic indicators.  Two zones had been recognized as disadvantaged
(A and B), while the rest of the country was considered as zone C.  The level of assistance to a
company depended on the zone in which the company was planning to operate, but there was nodifferential treatment according to industry.  In orde r to be eligible for incentives, an investment had
to consist exclusively of fixed assets and the company had to finance at least 30% of the approved
project with capital equity paid in cash.  The project had to be completed within five years of the
approval date, and at least 25% of the work within one year.  Factors taken into consideration in the
approval process included the potential of the investment to contribute to the national product, use of
state-of-the-art technology, technological inventiveness, and its contribution to special local needs and
to creation of job opportunities.
67. The privatization programme for the coming years had not yet been discussed by the new
Government.  There was no limitation on foreign capital in buying a share of privatized companies,
but there were some prerequisites, such as in the Telecommunications Law of 1982 (paragraph 120,
page 112 in the Secretariat Report) or to the telegraph services (paragraph 123, page 113).
68. Retail price control was exercised on some 18% of the consumer price index.  This apparently
excessive price control was explained by monopolies, such as in electricity production.  Nevertheless,
increasingly, products, such as meat and many dairy products, had been removed from control in
recent years.
69. Since 1992, competition policies had significantly strengthened through a stronger anti-trust
agency with very extensive anti-trust activities.  Concerning enforcement activities, convictions were
obtained in several criminal prosecutions, and others were pending.  Perhaps the most important case
involved a price-fixing cartel, which encompassed almost the entire insurance sector; the companiesWT/TPR/M/58
Page 16
were fined millions of U.S. dollars, and the executives were fined and received suspended prison
sentences. In civil/administrative proceedings, the Commissioner had appeared before the Trade
Restrictions Court and successfully opposed an application by Israel’s banks for court approval for the
coordinated closure of all their branches on Fridays.  The Commissioner reviewed hundreds of merger
notices a year; most were approved, many were subject to conditions.  A provision on the prohibitionon abuse of dominant position was added to the law in 1996; it was almost identical to Article 86 of
the Treaty of Rome, and European case law would be given great weight in its interpretation.
Referring to an advocacy role in privatization/deregulation, the representative noted that Israel’s law
made no such formal provision. In practice, howev er, the Commissioner did undertake such a role.
The Commissioner would be authorized to promulgate block exemptions, and these would require the
approval of an advisory committee. The block exemptions also required the signature of the Minister
of Industry and Commerce.  Regarding the defin ition of a monopoly, Israel’s law had a "technical
test" for determining the existence of a monopoly:  the "more than 50% of a relevant market" test.
However, this was only the first of a two-stage process.  It was understood that a monopoly would be
liable for abuse of its dominant position only when it was actually "dominant", i.e. when it could
exercise "market power".  Additional detailed writte n replies to the questions concerning competition
policy were circulated during the meeting.
70. As stressed in the opening statement, Israel uti lized multilateral, bilateral and unilateral routes
to enhance trade liberalization, competition, and economic growth.  Exposure to foreign competition
through bilateral trade agreements had paved the way to greater liberalization and deeper exposure
vis-à-vis other WTO Member countries.  Elimination of tariffs on a bilateral basis had compelled
domestic producers to become more efficient.  Following the experience with its major free-tradeagreements (the EU and the Unites States), Israel had been able to launch its unilateral liberalization
programme in 1991, which was to be completed in September 2000.  This programme was initiated,
inter alia , in order to minimize possible negative effects of trade diversions and to enhance trade
relations with countries not covered by free-trade agreements, thereby improving the opportunities for
the diversification of Israel’s export markets.  The delegation emphasized that in parallel with bilateralactivities, Israel had played an active role at the multilateral level and had undertaken further
commitments under the recently signed ITA.
71. The Israeli experience had shown that free-trade agreements had been a successful vehicle for
integration, and a complementary tool to the multilateral trading system.  As a result of Israel’s
unilateral liberalization programme, imports from non-preferential trading partners increased by 92%
during 1993-98, while imports from free-trade partners increased by only 33%.  At the same time,
exports to free-trade partners increased during the same period by 68%, while exports to non-preferential trading partners increased by 36%.
72. The new Treaty of Association between the EU and Israel, signed on 20 November 1995, had
not yet been ratified;  trade was currently conducted under an interim agreement which, for all
practical purposes, did not differ from the previous agreement.  Israel was awaiting confirmation from
the EU in order to notify the agreement to the WTO.
73. The first discussant stated that it was important to put countries under review in their proper
context.  It was also important to see the "forest", not only the "trees".  In the case of Israel, the larger
trade environment was crucial, as well as its ability to absorb the large influx of immigrants.  He
noted the importance of the fundamental changes made by Israel over the past 15 years.
74. The second discussant stated that as privatization proceeded the problems related to state aid
and price control would diminish.  On regional trade agreements, Israel was an example of how these
could complement the macroeconomic environment.  Israel’s regional trade agreements had been
trade creative.WT/TPR/M/58
Page 17
75. The representative of the United States noted that the U.S.-Israel free-trade agreement had
had many trade creating effects.  He encouraged Israel to notify the Interim Agreement between Israel
and the EU, which had already been implemented for a period of five years.
76. The representative of Japan noted that Israel’s incentive regime required the investment
potential to contribute to the national product.  He  asked for further clarifications on this condition.
He also asked for further clarifications regarding the conditions under which block exemptions could
be granted.  Regarding privatization, he asked for additional examples of basic and sensitive areas
where foreign investment was limited.  On free-trade agreements, he believed that it was important to
study the trade effects at the sectoral level.  He joined the representative of the United States in
encouraging Israel to notify its Interim Agreement with the EU.
77. The representative of Israel, referring to the comments on price controls and privatization,
noted that it was also necessary to consider the existence of natural monopolies.  Nevertheless, price
controls would be substantially reduced when Israel succeeded with the privatization of its basic
infrastructure and banks.  Regarding investment incentives, the main criterion was the project’s
economic viability.
78. The representative of the Republic of Korea requested further information on the effects at the
sectoral level of preferential trade agreements.
79. The representative of Israel stated that the replies to Japan’s questions concerning block
exemptions were provided in the written responses.   Concerning the impact of trade agreements by
sector, he noted that it was difficult to separate the impact of trade agreements from other
developments, because preferential trade liberalization had been accompanied by unilateral
liberalization.  However, imports from countries that did not have free-trade agreements with Israelhad increased (particularly in those sectors where duties had been reduced), while imports from free-
trade area countries had decreased.
80. The representative of Turkey noted that tax collection had fallen short of estimates due to
slow economic activity.  According to many economists, it might be beneficial to incur a deficit in the
public budget during periods of weak economic activity.  On the other hand, the budget should run asurplus during periods of strong growth.  Accordingly, a modification of the Deficit Reduction Law
was under consideration.
81. The representative of Israel stated that a decision had been taken to modify the Deficit
Reduction Law as well as allocating a larger budget for infrastructure.
82. The representative of Canada asked whether the Restrictive Business Practices Law had been
amended in 1998 and, if so, what were the amendments.   She requested additional information on the
difference between Article 86 of the Treaty of Ro me and Israel’s corresponding provision.  She asked
if there was any need for additional regulations in this area.  Referring to Israel’s written replies on
abuse of dominance, she asked whether there had been any other cases than those referred to in the
replies.
83. The representative of Hong Kong, China look ed forward to receiving additional data from
Israel, and other WTO Members, on trade creation resulting from preferential trade agreements; such
data would be useful in order to form a better understanding of the relationship between regional trade
agreements and the multilateral trading system.
84. The representative of Israel stated that his delegation was not in a position to reply to the
question on competition policy as they had not brought an expert on this topic to Geneva; the
Anti-Trust Authority would be able to provide detailed answers.  He referred to the Secretariat Report(page 19) for details on the new agreement with the EU.WT/TPR/M/58
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(ii) Trade policies and measures
85. The representative of Israel noted that all relevant information was included in its customs
tariff; hence the alleged complexity of the tariff structure.  Some end-use provisions had become
redundant following the reduction of tariffs and accordingly, had been eliminated, while safeguard
levies applied only to a limited number of products .  The liberalization programme would lead to a
further simplification of the tariff system.  As a result of Israel’s unilateral liberalization, the applied
rate was often lower than the bound rate; Israel did not intend to apply the bound rate.  She also noted
that the customs system was fully computerized.
86. Israel had submitted changes relating to the introduction of the HS96 in September 1996 and
in February 1999.  As no reservations had been notified to the Secretariat within the stipulated time
period, Israel was waiting for the earlier reservations to be lifted.
87. Regarding other charges on imports, the wharfage fee was charged by the Port Authority in
order to cover its infrastructure costs.  The fee had gradually been reduced to 1.1% and further
reductions were under consideration.  The purpose of the TAMA system was to reflect the mark-up
between the import price and the wholesale price.  The importer could choose between applying the
TAMA rate or his/her own mark-up.
88. Since the enactment of the Trade Levies Law in 1991, Israel had imposed a total of four anti-
dumping duties on the EU, of which two were imposed for a period of less than 18 months.  An
examination of the statistics of other WTO Members demonstrated that it would be unreasonable to
consider that "these measures could indicate the persistence of some protectionist attitude aimed at
giving an unduly competitive advantage to Israeli i ndustries" as referred to in the EU document.
Israel was making every effort to complete the legislative process of bringing its law into conformitywith the Anti-Dumping Agreement.  In practice, however, the authorities already followed the
Agreement.
89. The Trade Levies Law provided for the imposition of safeguard and research levies.  The
research levy was cancelled at the end of 1996.  Safeguard levies could be imposed for the protection
of domestic production in cases of substantial injury, or threat thereof, caused by imports.  Itsimposition required the approval of the Knesset and may be appealed in court.  Because of the need to
justify the imposition of the levy and its rates, as well as the possibilities of appeal, the use of
safeguard levies had been considerably reduced to cover only some edible oils and fats, and oil cakes.
Safeguard levies were applied when the Government wished to give importers an opportunity to
appeal and to stress to the producer the temporality of the measure.  Safeguard levies for the
protection of domestic production were applied on an  MFN basis, with the exclusion of free-trade
agreement countries, which might be exempted or subject to a lower rate.  In addition, levies might beapplied in accordance with bilateral preferential agreements; this was the case with U.S. imports.
None of the levies were safeguard measures within the meaning of Article XIX of the GATT 1994
because they were not applied above the bound rate.  Israel was in the process of drafting new
legislation to address the imposition of safeguard measures within the meaning of the Safeguards
Agreement.
90. Turning to import licensing and prohibitions, she noted that the objective of import permits
for fresh fruit and cut flowers was to inform th e importer of Israel's phytosanitary requirements.
These requirements were based on a scientific risk assessment.
91. Until 1994, all meats were imported by a state-trading agency, with exclusion only of internal
parts (liver, heart and the like).  Being a state agency, it imported only kosher meat.  After theprivatization of meat imports, religious parties claimed that the possibility of imports of non-kosher
meat would result in a breach of the status quo; the maintenance of the status quo regarding religious
issues was a basic understanding in Israel.  The passing of the law relating to meat and, subsequently,WT/TPR/M/58
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meat products, which assured the maintenance of th e status quo, saved the coalition Government.  As
part of the status quo, limited domestic production, sale and consumption of non-Kosher meat
continued to be allowed, as well as imports of non-kosher internal parts.  Import restrictions on meat
and meat products were notified as part of Israel’s WTO market access schedule, stating that "All
commitments pertaining to HS chapters 02, 1601, 1602, 1603 are subject to Israeli legislationconcerning Kashrut of imported products".
92. Regarding kosher certificates, the Chief Rabbinate was the competent Authority for the
certificates. The Chief Rabbinate had issued a list of Rabbis located in many countries whose kosher
certificates were recognized;  the fees for such certificates were established by each Rabbi.  If an
importer requested a certificate from the Chief Rabbinate in Israel, the charge was based on the costs
of sending the inspector to the premises of the manufacturer and included flight, accommodation, and
a per diem fee.
93. The Customs Authority used risk-assessment techniques and post audit control for the
verification of import value for customs purposes.  Therefore, the number of verifications was small.
When verification procedures took more time than usual, the Customs allowed the goods to be
released.  During the preparations for adopting the Customs Valuation Agreement, the WCO
compendium on customs valuation was translated into Hebrew for use by customs officers and by thepublic, courses were held, and training were undertaken.  Regarding appeals, these were first lodged
with the relevant customs house, then to the cust oms headquarters, and finally to the court system.
94. As stated in Israel’s opening statement, one of the key features of Israel’s internal trade policy
was a reform in mandatory standards policy.  The application of mandatory standards had been
limited to protection of public health, safety and environment or consumer protection.  In addition, inAugust 1999, the Government took a decision to ensure the adoption of new, and alignment of
existing, Israeli standards to international standa rds in accordance with the TBT Agreement.  The
Standards Institute was responsible for preparing a plan to align all standards with international
standards within four years.  Quality requirements no longer existed in mandatory standards.
Moreover, all mandatory standards were equally enforced on domestically produced and importedgoods.
95. Regarding sanitary and phytosanitary measures, Israel was in the process of passing new plant
protection regulations to conform with the SPS Agreement and international plant protection
standards;  the use of "tropical or subtropical" country of origin as a reason to prohibit imports of
fresh fruit and vegetables would be eliminated.  The new regulations were expected to enter into force
by the end of 1999.  Referring to questions by Japan, Israel had notified to the WTO that certain
measures concerning BSE were meant to limit the importation of cattle up to 36 months of age.  Withreference to a question by Canada, she stated that the same approval procedure was applied to
pharmaceutical products from all countries.
96. Labelling, marking and packaging requirements were regulated by the Law for the Protection
of the Consumer of 1981.  All products destined to the consumer had to be marked with the name of
the product, the trade mark, the name of the producer, the name of the importer, the country ofproduction, the quantity, and the quality for second quality products.  For certain products (such as
food products), marking and labelling requirements were specified in the standard.
97. Regarding government procurement, the offset ratio would be lowered in accordance with the
timetable set out in Israel’s commitment under the Government Procurement Agreement.  The
Mandatory Tenders Law declared that any treaty ratified by Israel prevailed over the regulations incase of conflicting provisions.  Therefore, the 35% offset provision would be lowered to 30%,
allowed under the Agreement, as of 1 January  2001.  Due to the complexity of the required
notification, Israel, like most members, had faced difficulties in collecting the relevant data.  IsraelWT/TPR/M/58
Page 20
hoped that since this subject was under review in the Committee, a simplified formula would be
found.
98. Regarding intellectual property rights, she stat ed that in order to comply with its TRIPS
commitments, Israel had introduced a fast-track legislation; the bill included various amendments to
the different laws relating to the TRIPS Agreem ent.  On enforcement, the Customs Authority
systematically inspected for intellectual property violations.  In the past 18 months, its activities had
resulted in 30 seizures.  In addition, investigations of indirect taxation violations had led to the
discovery of infringing merchandise, followed by seizures and criminal prosecutions.  Activities
performed by the newly established special police unit included the seizure of 25,000 infringing
CDs, 5,800 computer mice falsely labelled as Microsoft products, and hundreds of items infringing
the Warner Brothers trade mark; the enforcement activities during the first half of 1999 were equal to
the activities undertaken during the whole of 1998.  The police units had been ordered to give toppriority to investigating intellectual property offences;  to initiate activity and not act only on
complaints received;  to investigate the crime thoroughly;  to instruct officers on how to gather court-
admissible evidence;  and require police prosecutors to demand stiff punishments for offenders in
court.  Activities were also undertaken in order to raise the awareness.  Detailed written replies to the
specific questions on copyright, patents and geographical indications were circulated during themeeting.
99. The second discussant appreciated the elimination of the specific components in compound
rates of industrial products; he hoped that this also related to alternate duties.  He emphasized the
importance of liberalization by September 2000.  He was pleased that Israel did not intend to apply
the bound rates.  He encouraged those WTO Members who still maintained a general reservation toIsrael’s HS 96 notification to withdraw it immediatel y.  On the issue of wharfage fees, he stated that
the issue was not the existence of the fee, but the unequal treatment between importers and exporters.
Regarding the safeguard levy, while it was always within the bindings, it nevertheless gave rise to
uncertainty for the business community as well as for consumers.  He hoped that maximum restraint
would be used in the future use of the levy.  He welcomed the decision that the Standards Institute
was required to prepare a plan to align all standards to international standards within four years.  As to
labelling, further efforts should be made to increa se transparency and to translate into English the
various requirements.  He appreciated the efforts made by the Government to have the
TRIPS-compatible legislation in place by the necessary date.  It was important that efforts continued
to enhance protection and enforcement.  Finally, he noted that the protection level of agriculture was
still high; the system was complex, and sometimes measures overlapped.
100. The representative of the United States was pleased to know that Israel was committed to
implementing the TRIPS Agreement as of 1 January 2000 and had introduced fast-track legislation for
its implementation.  He was also pleased that the dr aft copyright law would be amended to address the
remaining deficiencies with respect to TRIPS.  However, the amendment would be in a subsequent
legislative process; he hoped that it could be completed as soon as possible.  With respect to the
enforcement, he appreciated the details that had been provided.
101. The representative of Israel noted that the difference between bound and applied rates had
occurred as a result of Israel’s unilateral liberalization programme.  While he acknowledge the
uncertainty aspect related to the discrepancy between bound and applied rates, he pointed out the
positive aspects of the liberalization programme.  He clarified that the TRIPS implementation bill
under consideration covered all of Israel's TRIPS obligations.
102. The representative of Japan asked why the wharfage fee was different for exports and
imports.  He also asked for a timetable regarding the submission of the safeguard levy legislation to
the Parliament.  On TRIPS, he joined the representative of the United States in expressing his
appreciation of Israel’s efforts in implementing the TRIPS Agreement.WT/TPR/M/58
Page 21
103. The representative of Israel was surprised to note Japan’s query regarding the safeguard levy
legislation:  without such legislation in place, Israel would be unable to impose any safeguard levies
in accordance with Article XIX of the GATT 1994.
104. The representative of Japan stated that his query had been to merely clarify the timetable for
the submission of Israel's safeguard legislation to the Parliament, and that he did not refer to the
merits of such legislation.
105. The representative of the Republic of Korea asked whether preferential trade agreement
partners were exempted from the safeguard levy.
106. The representative of Israel stated that if the safeguard levy was in accordance with the
bilateral agreement, which provided or allowed the imposition of a levy, the levy applied only to that
country.
107. The representative of Hungary agreed with the comments on safeguard levies made by the
second discussant.  He noted that the information contained in the Secretariat report (paragraph 36 on
page 41) differed with respect to whether the imposition of the levy needed Parliamentary approval.
Regarding the import ban on non-kosher meat and meat products, he hoped that the Government
would be able to find a fully WTO-consistent solution to this issue.  He urged the Government to
accelerate the cutting of the offset requirement in government procurement.
108. The representative of Colombia asked for further clarification as to whether the import ban
from countries in sub-tropical and tropical regions would be lifted for all products shown in the list,
and, if so, the timetable.  He was also interested to know whether one of the reasons for the ban was
related to the protection of human health, as stated in the Secretariat's report.
109. The representative of the European Communities noted that there had been a slight
misunderstanding in the way Israel had answered  their question on the imposition of anti-dumping
duties.  He had referred to an 18-month deadline for completing an investigation from the moment it
had been initiated.  Referring to his oral statement, he asked about Israel’s intention in the
forthcoming negotiations.
110. The representative of Israel stated that Israel would convey a written answer to the question
posed by Colombia regarding plant protection.  Regarding the safeguard levy, parliamentary approval
was needed for the imposition of such a levy.  He reiterated that Israel had already indicated its
positive attitude towards further negotiations on industrial tariffs, as well as on trade facilitation.
(iii) Sectoral policies
111. The representative of Israel stated that Israel had been making an effort to liberalize
agriculture access by standing by its Uruguay Round commitments and by reducing tariff.  The tariff
structure, which was transparent and uncomplicated, had different rates for the same product due tobilateral trade agreements.  Seasonal tariffs were based on the idea that during the off-season, the
tariff should not impede access to the Israeli market .  Although the tariffication resulting from the
Uruguay Round had increased tariffs, agricultural (including foodstuff) imports had increased by 80%
during the last five years.
112. Israel administer its agricultural quota regime by publishing its market access commitments.
Any qualified importer could apply to import under the regime; a tender system was introduced when
the applications exceeded the quota.  Israel did not impose any customs levy on imported animals that
were not stated in its schedule;  imports of animals (cattle and sheep) had increased.WT/TPR/M/58
Page 22
113. Regarding Israel's notifications on domestic sup port, all deficiency payments referred to the
safety net for the absorption of su rpluses; investment programmes were implemented according to the
Encouragement of Capital Investment Law (Agriculture); and income payments under the direct
support scheme ended in 1995.  By mistake, the domestic support for non-irrigated crops had not been
included in the notifications, which would be corrected accordingly;  support for this product fell intothe de minimis category and the support price scheme was based on a guarantee to supplement up to
82% of normative cost of production.
114. The Natural Disaster Law did not use different rules or criteria to assess eligibility and
compensation between farmers falling within the natural disaster insurance programme and farmers
who were not covered.  The administrators of the Natural Disaster Funds were the insurance
companies.
115. Production and marketing boards were not involved with import.  The Boards collected the
insurance fees from the producers and transferred them to the insurer.  On the other hand, the Boards
administered exports.  New companies had started to export fresh agricultural products.
116. Regarding manufacturing, tariff protection on high-tech products was low since these
products had high value added, were highly profitable, and competed in a competitive market.  On the
other hand, because traditional industries were labour intensive, protection was needed in order toallow structural adjustment without causing social unrest.
117. Israel was conducting internal consultations in preparation for the services negotiations to
start in January 2000.  The legal departments of the ministries were reviewing Israeli legislation to
identify all relevant legislation.  Israel would know what conditions applied in the various services
sectors only at the end of this process.
118. Referring to MFN exemptions in audiovisual sectors, Israel had signed co-production
agreements with Australia, Belgium, Canada, France, Germany, Italy and Sweden.  In accordance
with these agreements, works co-produced with persons of these countries were granted treatment as
domestic works.
119. Over the past years the Government had initiated a broader reform programme in
telecommunications, designed to increase competition.  The Government intended to liberalize
further, and was planning to introduce additional cellular providers (for data and voice), additional
operators for domestic fixed services (wire, wireless, and satellite), and additional operators in the
international long-distance field. Regarding the privatization of Bezeq, the timetable, types of licence,
and type of ownership to be permitted was currently under consideration.  The access charge was a
per minute charge and reflected Bezeq’s access deficit as the company had made large investments in
the infrastructure.  However, the access charge would decrease over time until it reached zero in 2002;by then the deficit would be covered adequately.  All service providers paid the same access fees to
Bezeq.
120. The tourism sector had been regulated in orde r to supervise the service providers. Israeli
registration was needed in order to enable regulation of the sector.  The registration procedures for an
Israeli entity was the same as for any other company operating in Israel.
121. Turning to maritime transport, he stated that there were no restrictions on cabotage in Israel
and Israel had no intention of applying any restrictions regarding foreign vessels from countries that
did not apply restrictions on Israeli vessels.  All Israeli shipping companies were permitted to
participate in maritime conferences in the framewor k of a consortium.  The Government did not have
any other financial involvement in Zim apart from be ing an owner; it retained 48% ownership of Zim
for historical reasons.  Zim did not enjoy any special privileges with respect to government cargoes.
Regional, bilateral, and plurilateral agreements under the responsibility of the Shipping and PortWT/TPR/M/58
Page 23
Administration did not contain cargo shipping clauses or any other form of restriction relating to
market access.  Subsidies extended to the sector were aimed at assisting Israeli shipping companies to
become more efficient.  The subsidy, which was for a four-year period, was conditioned upon
decreasing manpower on Israeli ships and lowering the costs of Israeli sailors.  If these conditions
were not met after four years, the subsidy would no longer be granted.
122. Regarding professional services, the issuing of visas for intra-corporate specialists with
advanced knowledge and skills was based on the employer’s request; the visa was given for a period
not longer than one year.
123. On financial services, he stated that due to the late receipt of the questions Israel would
transmit a written answer at a later date.
124. The first discussant congratulated Israel for being on the right "track".
125. The second discussant echoed the remarks made by the first discussant.  He also appreciated
Israel’s comprehensive coverage of the replies.
126. The representative of India noted that replies had not been provided for his delegation's
questions related to difficulties experienced by Indian pharmaceuticals and elimination of restrictions
in registering such products in Israel;  restrictions on Indian software, specialists, and engineers;  and
discrimination faced by Indian construction workers.   He hoped that the reduction in the tariff for
textiles by the year 2000 would be helpful in boosting Indian exports of textiles into Israel.
127. The representative of Japan was encouraged by Israel’s efforts to liberalize the services
sector.  He asked for additional information on Israel’s MFN exemption in banking.  He also asked
about Israel’s intention to expand co-production agreements in audiovisual services to include
additional countries.
128. The representative of Israel stated that Israel did not discriminate among countries as regards
permits for visas. Concerning India’s question on pharmaceuticals, he stated that the Ministry of
Health would be the competent authority to answ er that question.  Regarding Japan’s question on
financial services, Israel would provide later a written reply.WT/TPR/M/58
Page 24
VII. CONCLUDING REMARKS BY THE CHAIRPERSON
129. We have had constructive discussions on Israel's trade and trade-related policies, putting them
appropriately into the context of the wider environment of which they form an integral part.
130. Since its previous Review in 1994, Israel has taken important legislative, regulatory, and
practical steps towards a more open, transparent, and liberal trading regime.  Through its tradeliberalization programme, as well as the timely implementation of its multilateral commitments in the
WTO, Israel actively contributes to the stability of the multilateral trading system.  Israel's efforts in
the areas of structural reform and further liberalization of its economy, including through the
pursuance of increasingly open trade and investment  policies, are commended.  Output growth slowed
in 1998 after several years of high GDP growth, during which a wave of immigration was
successfully absorbed.  Israel is therefore encouraged to continue on its liberalization path and, where
appropriate, to intensify privatization.  It is also noted that traditional, labour intensive manufacturingindustries receive high tariff protection, while high-technology industries, with relative low levels of
protection, are becoming increasingly competitive.  Israel's commitments under the GATS (basic
telecommunications - already producing tangible benefits to Israeli consumers - and financial
services) and its meaningful contribution to ITA are welcome.
131. Israel's trade and investment regimes are seen to be generally transparent.  The foreign
investment regime is considered as being liberal: considerable incentives are provided, discriminating
at times against domestic investors.  Recent trade reforms, in particular on customs valuation and
trade facilitation, are welcome.
132. Against this broadly positive appreciation, concerns were however raised on some specific
subjects, inter alia :
- the complexity of the tariff structure, with the existence of specific, compound,
alternate rates, and seasonal tariffs, and with a low level of tariff bindings as well as a
gap between applied and bound rates.  Further efforts at simplification, transparency,
and predictability are suggested;
- a number of other import charges, notably safeguard levies, and a wharfage fee
discriminating against importers;
- prohibition or restriction measures on imports of certain meat (in particular
non-kosher) and dairy products, animals, flowers and fruit, beer, pharmaceuticals,
chemicals and textiles;
- international consistency of domestic mandatory standards and some SPS measures;
- competition policy, offset requirements in government procurement, state aid, and the
protection of intellectual property rights, in particular for copyrights, piracyenforcement, pharmaceutical patents, and geographic indications;
- the still significantly protected agricultural sector, in particular high tariffs, import
controls, state trading, and subsidies;
- remaining restrictions in the services sector:  banking, insurance, maritime transport,
tourism, and professional services.
133. Israel is party to an increasing number of preferential trade agreements covering the bulk of
its trade.  While the complementarity of thes e agreements with the multilateral system wasWT/TPR/M/58
Page 25
highlighted, it was noted that due regard should continue to be paid to the risk of trade distortion and
to potential disadvantages for other trading partners.
134. All the clarifications given by Israel to the Members are fully appreciated, in particular the
commendable effort made by the delegation of Israel to provide comprehensive answers in writing for
the benefit of all Members during the course of the Review.
135. In conclusion, Israel is encouraged to continue on its trade liberalization path and to take an
active role in the forthcoming multilateral trade negotiations.WT/TPR/M/58
Page 26
ANNEX I
ADVANCE WRITTEN QUESTIONS
QUESTIONS BY AUSTRALIA
Paragraph 28 of Chapter IV of the Secretariat's report describes Israel's regulations on the importation
of non-kosher meat products as "potentially restrictive".  We would be grateful for an explanation of
Israel's prohibition of the importation of non-kosh er meat/meat products when such products are
readily available for sale  within Israel.
Paragraph 26 of the same chapter notes that protection in the dairy and meat products sub-sectors is
relatively high with imports continuing to be subject to high tariffs and quantitative restrictions.  Howdoes Israel determine its quota regime, in particular for products such as cheese?
How does Israel justify giving its local cattle and sheep market increased levels of protection by
imposing prohibitive customs levies on imported animals?
Can Israel explain the introduction of graded tariffs based on the body weight of imported animals for
slaughter?
What is the licensing process for an Australian abattoir to export kosher beef and sheep meat to
Israel?
Could Israel comment on the relationship between it s regional and multilateral trading arrangements,
and indicate how it will ensure that regional and bilateral initiatives support the process of multilateral
trade liberalization, and strengthen the multilateral trading system?
QUESTIONS BY THE UNITED STATES
Intellectual property
Copyright
The draft copyright law, which is currently in its second reading in the Knesset, does not appear to
provide for a 50-year term of protection, from the end of the calendar year of production, forproducers and performers of sound recordings, as required by Article 15(5) of the WTO TRIPS
Agreement.  The current statutory period of protection is only 25 years for performers and 15 years
for producers (chapter 4, performers and broadcasters' rights law, 1984, as amended 1986).  Has the
Government of Israel prepared amendments to the performers' and broadcasters' rights law that would
address this issue?  Are sound recordings intended to be fully covered under the provisions for"cassettes" in chapter 9 of the current draft legislation?  Does the Government of Israel intend to
update the draft copyright legislation prior to the 1 January 1 2000 deadline for the implementation of
the TRIPS Agreement?
The draft copyright law provides rental rights for most copyrighted works, but does not appear to
cover explicitly sounds recordings.  How does the Government of Israel intend to provide protection
of rental rights for sound recordings as required by TRIPS Article 14(4)?  The draft copyright law
does not appear to provide explicit classification of end-user piracy as a copyright infringement.  We
have received complaints about high levels of software piracy in Israel, in part due to the failure of
institutional software purchasers to conform with licensing agreements (i.e. unauthorized copying ofWT/TPR/M/58
Page 27
software for internal use).  Under these conditions, it would be very helpful for end-user piracy to be
classified as a criminal offence.  Does the Government of Israel intend to classify end-user piracy as a
criminal offence?
We understand that Israeli case law permits parallel importation of authentic copyrighted and trade
marked products.  Please clarify whether the denial of parallel import protection for copyrighted and
trade marked products is a fully implemented policy decision in Israel.
PatentsIt appears that provisions in the final regulations for the implementation of amendments to the
Pharmacists Act could seriously weaken pharmaceutical patent protection, by permitting the Ministryof Health to authorize the importation of unlimited quantities of unauthorized copies of patented
pharmaceutical products.  How will the Government of Israel ensure that prior to any Ministry of
Health decision in this area, that the relevant patent information would be taken into account to
protect the rights of patent holders in Israel?
Protection of confidential data
What steps is the Government of Israel taking to protect firms which submit confidential test data or
other undisclosed information to Ministry of Health or other regulatory authorities in order to obtain
marketing approval in Israel, as required by TRIPS Article 39(3)?
EnforcementAccording to the Secretariat Report, Israel has established special enforcement units to investigate
intellectual property crimes.  We welcome this decision and would appreciate some additionalinformation about these units, with respect to staffing and resources.  Can the Government of Israel
provide any information on the number of investigations, raid activities, and prosecutions that have
resulted from these units over the course of the months in which the units have been in operation?
Services
Does Israel maintain any restrictions or limits on purchases of services (including pleasure travel,
hospital stays, college students, insurance) by Israelis travelling abroad?
What is the nature of the labour market tests applied to intra-corporate specialists with advanced
knowledge and skills who apply for temporary entry into Israel?  What length of stay is permitted?
What are the prospects for liberalizing such requirements through negotiations?
Does Israel have arrangements with other countries to recognize professional credentials (e.g. for
physicians, dentists, nurses, accountants, architects or engineers)  What are the prospects for removing
citizenship requirements for the licensing of lawyers in Israel?
What action is required in Israel to implement the recently adopted WTO disciplines for regulation in
the accountancy sector and to make them legally binding?
According to paragraph 79 of the Secretariat report, restrictive arrangements are generally prohibited
in Israel, although the law explicitly exempts certai n activities, such as international sea transport.
Can Israel describe the arrangements that are being specifically exempted for sea transport?WT/TPR/M/58
Page 28
Telecommunications
Please explain how the current access fee charged for use of Bezeq's network for call connection is
consistent with Israel's commitments under the reference paper, as part of the GBT Agreement?
Insurance
Israel has, for the most part, made liberal market access commitments for insurance services.
However, Israel did not bind cross-border commitments for services auxiliary to insurance.  We urge
the Government of Israel to consider more comp rehensive commitments in this sector, in order to
guarantee consumers full access to such key insurance services.
Agency and brokerage services
Israel has included full commitments for agency and brokerage services.  However, the report is not
entirely clear regarding the ability of foreign suppl iers to participate in this sector.  Could the
Government of Israel please provide additional information on the ability of foreign suppliers toparticipate in this sector?
Tourism servicesWhat is the rationale for restricting access to the tourism sector?What is the rationale for requiring that the ownership of hotels, travel agencies, and tour operators
must be Israel-registered companies and that travel agencies should employ at least one
Israel-licensed travel expert?
What requirements must be met by a foreign-based hotel, travel agent, or tour operator to become an
Israel-registered company?  What are the prospect s for removing citizenship requirements for the
licensing of tour guides in Israel?
Distribution servicesPlease provide more information on the legal and regulatory system for distribution services.  Can
foreign service suppliers establish wholesaling, retailing, and franchising outlets?
Financial servicesAccording in paragraph 16 of the Secretariat Report, the trade agreement with the European Union
provides for the possibility of a phased freedom of movement in financial services (beyond
commitments undertaken in the WTO Agreement on Trade in Financial Services.)  Has this
"possibility" been implemented or are there plans to implement it in the near future?  What is the
GATS rationale for this possibility?  Does the agreement with the European Union provide for the
possibility of other liberalized services commitments?
According to paragraph 98 of the Secretariat Report, foreign non-bank securities services providers
may only establish in Israel as subsidiaries.  Israel's GATS Schedule, however, lists "none" for
commercial establishment in securities trading; fo r underwriting, the only limitation is that banks, not
non-banks, must establish subsidiaries to underwrite securities.  Are foreign non-bank securities firmsallowed to establish as branches in Israel?
We were pleased that actual treatment of foreign financial service providers by Israel appears to be
more liberal, in some respects, than Israel's commitments under the GATS.  For example, the report
mentioned the existence of a futures and options market, but Israel did not bind trading of derivativeWT/TPR/M/58
Page 29
products under GATS.  Israel also  did not bind trading of "exchange rate and interest rate
instruments" (such as forwards and swaps) or "oth er negotiable instruments including bullion," both
of which we understand do exist in Israel.  The report  clarified that Israel's regulatory regime appears
to be quite liberal with regard to cross-border supply (Mode 1) and consumption abroad (Mode 2) of
some types of non-insurance financial services.  Paragraph 77 of the Secretariat Report notes that"Israel does not have barriers to international trade in financial services".
Further, the report mentions that foreign banks do not need to establish commercial presence to
provide wholesale banking services and that foreign providers may offer foreign mutual funds to
Israeli investors, subject to certain prudential requirements.  Under the GATS, Israel only made
cross-border commitments in three sectors.  Israel did not bind Mode 2 commitments for other sectors
or make cross-border commitments (both Modes 1 and 2) for financial advisory services.
Are there other financial services areas in which actual treatment exceeds GATS commitments?  To
what extent would Israel consider binding actual practice during the next round of services
negotiations, and would this pose problems for Israel in particular areas?
Customs procedures
The United States commends Israel for the reforms it has made in its customs valuation regime, but
we are concerned about the long delays often associated with rendering decisions on valuation.  Does
Israel have a uniform procedure for addressing cu stoms valuation decisions?  Please describe the
procedures, including associated timetables, and the hierarchy of government bodies involved in
rendering valuation decisions.
Import licensing
The United States is concerned by the non-transparency and unpredictability of Israel's administration
system for tariff rate quotas.  What plans does Israel have to improve the transparency with which it
administers its tariff rate quota system?
QUESTIONS BY HONG KONG, CHINA
Trade liberalization
(WT/TPR/G/58, page 6, paragraph 17;  WT/TPR/S/58, page 99, paragraph 63)
While we note that Israel is implementing a unilateral import liberalization programme of industrial
products including textile products, it still maintains relatively high tariffs and significant tariff
escalation on imports of textiles and clothing from the majority of WTO Members.  We would like to
have more details regarding Israel's liberalization programme in respect of textile products and in
particular the target rate to be achieved in September 2000.
Preferential agreements
(WT/TPR/S/58, page 15, paragraph 1)
We note that a substantial portion of Israel's trade with the world (71% for exports and 74% for
imports in 1998) is conducted under preferential agreements.  While we appreciate Israel's
commitment to the multilateral trading system, we are concerned that preferential trade agreements
could potentially divert trade from the most efficient import sources.  We note the Israeli authorities
are debating whether to extend the preferential rates on an MFN basis.  Being an open economyWT/TPR/M/58
Page 30
ourselves, we would strongly encourage such an extension.  We are interested to know if a decision
has been made, and if so, the implementation schedule.
Tariffs
(WT/TPR/S/58, pages 32-40, paragraphs 22-31)
We note that Israel has a wide range of tariff scheme s, such as MFN tariffs, preferential tariffs, tariff
quotas, safeguard levy, seasonal tariffs, end-use tariff schemes and concessional entry schemes.
Bearing in mind that such a wide range of tari ff schemes would complicate the administration and
reduce the transparency of the Israeli tariff regime, we would like to know if the Israeli Government
had any plan to simplify its tariff regime.
Other levies and charges
(WT/TPR/S/58, page 41, paragraphs 36-37)
We note that Israel imposes a number of levies or charges on imports.  Safeguard levies, imposition of
which does not require the approval of the Parliament (in contrast to MFN tariff), allow for easy
manipulation and thus reduce predictability of the meas ure.  Another levy, wharfage fee, is higher for
importers (1.1% for using the ports) than for e xporters (0.2%). This implies that the importers
subsidize the exporters, and in effect, constitutes discrimination to imports.  We are interested toknow whether the Israeli authorities have any pl an to eliminate such discriminatory levies.
Technical regulations and standards
(WT/TPR/S/58, pages 67-69, paragraphs 96-103)
A substantial portion (three quarters) of the mandatory standards has yet to be aligned with
international standards.  In addition, few standards published after 1976 have been translated from
Hebrew into English, and more and more products are subject to technical regulations upon
importation into Israel (from 31.5% in 1992 to 39.4% in 1999).  While we support initiatives to
protect the environment, human health, and safety, we are concerned that the adoption of technical
regulations and standards should not create unnecessary restrictions to trade, should be transparent,and wherever possible, follow international standards.  We are interested to know the response of
Israeli authorities to the above situation.
(WT/TPR/S/58, pages 71-72, paragraph 110)
Israeli health and safely standards apply both to imports and domestically produced products.  We
note the observation of the Secretariat that, until recently, enforcement of some mandatory standards
that included quality requirements was frequently applied to foreign goods but not to domestically
produced goods.  Would the Israeli Government share with us its plan, if any, for non-discriminatory
treatment on imports?
Specific industry sectors
(WT/TPR/S/58, pages 91-93, paragraphs 39-43)
We note that certain industry sectors, e.g. clothing and footwear, are being protected by multiple
measures including relatively high tariffs, mandatory standards, and licensing requirements.
According to the Secretariat, there seems to be a negative relationship between the degree of tariff
protection and the industries' performance.  Do the Israeli authorities have any plan to remove such
protective measures to specific industry?WT/TPR/M/58
Page 31
Financial services
(WT/TPR/S/58, page 103, paragraph 79)
Israel has listed an MFN exemption on the issuance of licence to foreign banks whereby a reciprocity
provision is in force, but it is mentioned that the provision has not been invoked for recent years.
Would the Government consider reviewing the exemption?
(WT/TPR/S/58, pages 112-3, paragraphs 122 and 127)Local telephone services is under the monopoly of  the state-owned company Bezeq.  In Israel's
Schedule, it is stated that the monopoly's exclusive rights will be terminated no later than year 2001.
We are interested to know more about the arrangements after the termination of monopoly, for
instance, whether foreign investments would be permitted.
For international long-distance services, foreign ownership is capped at 74%, and the two
joint-venture licences have exclusive rights until 1 January 2002.  Would the Government consider
allowing more foreign ownership in the future?  Would there be any cap on the number of licences
after the end of exclusivity?
It is noted that the Government intends to pr ivatize the state-owned company Bezeq and would
withdraw its position completely.  It would be usef ul to know the time plan for the privatization.
QUESTIONS BY COLOMBIA
Customs procedures
(WT/TPR/S/58, paragraph 19)
The Secretariat Report mentions import permits are required before shipment for, among other goods,
fresh fruit and cut flowers.  Could the Israeli authorities explain in more detail what are the objectives
of such permits and what are the procedures to obtain them?
(WT/TPR/S/58, Table III.8)Table III.8 of the Secretariat Report lists the products that are prohibited for import into Israel.
According to the table, for protection of human health reasons, importation of fresh fruit and other
vegetable products are prohibited where the country of origin is in a tropical or subtropical region.
This measure seems to be unjustified and discriminatory as it does not apply to all import origins.
Could Israel provide the list of countries of the tropical or subtropical region whose imports are
prohibited?  Could Israel explain in detail the criteria that defined products from a tropical orsubtropical region as a risk for human health?  Could Israel provide information on the conditions
required to withdraw a product for the prohibit list?
Tariffs and other border levies
The Secretariat Report mentions the principal characteristics of the Israeli tariff structure.  These
include specific duties, seasonal tariffs and the so-called safeguard levies.  Similarly, the presence of
tariff peaks and tariff escalation and tariff dispersion commonly appear in products such as textiles,
clothing, footwear, and agricultural products.  These characteristics make the tariff structure less
transparent and impede access to the Israeli market.  Could Israel provide information about its plansto give its tariff a more even and neutral structure?WT/TPR/M/58
Page 32
QUESTIONS BY THE REPUBLIC OF KOREA
Trade policy framework
Paragraph 5 in the Summary Observations mentions that "to bring its legislation into conformity with
the obligations it took under the Uruguay Round, Israel has amended legislation in areas such as
customs valuation and standards.  Other legislative changes are in the process of being implemented
or are expected to be soon considered".  Korea appreciates the Israeli move towards more conformity
with WTO rules, and wishes to inquire about these "o ther legislative changes" that are in the process
of being implemented.  Korea would thus appreciate if Israel could provide more information on such
changes.
Safeguard levies
The Secretariat Report stipulates in paragraph 53 of page 49 that "although the Trade Levies Law was
notified to the WTO Committee on Safeguards in June 1995, Israel has, according to the authorities,no safeguard legislation within the meaning of Article XIX of GATT 1994 and the Agreement on
Safeguards. Moreover, since the establishment of the WTO, Israel has not applied safeguard measures
within the meaning of Article XIX of the GATT and of the Agreement on Safeguards".
Could Israel provide us with the reason why it fa vours safeguard levy over a safeguard legislation
directly within the meaning of Article XIX of the GATT 1994?  It is our understanding, according to
paragraph 36 of page 41 of the Secretariat Report, that the rates applied through safeguard levies
differ depending on the origin.  How else are Is rael's safeguard levies different from GATT 1994
Article XIX requirements?  Is the Israeli Government considering rendering its safeguard levies
compatible with the spirit and the GATT 1994 Article XIX?
Tariffs
According to page 34, a wide array of tariff lines, e.g. textiles and textile articles, remain unbound,
thereby raising problems of predictability for importers.  Does the Israeli Government plan to increase
the number of bound rates in the near future?
Also, during the period under review, Israel has introduced a number of seasonal tariffs.  As a result
of the imposition of such tariffs, the price paid by domestic consumers for seasonal goods, such as
apples and other fruit, increases when they are in season rather than when they are not in season
(paragraph 30 of page 40 of the Secretariat Report).  What is the legal base for the seasonal tariffs?
Competition policy
The Secretariat Report points out on page 59 that approval of a restrictive arrangement such as a cartel
is granted if the applicants demonstrate that the arrangement contributes to the public welfare
(Article 5 of the Restrictive Trade Practices Law).
Going beyond the examples provided in footnote 31, page 59, how does the Israeli Government
legally define "public welfare"?  Is the presence of competition in the domestic market a consideration
when weighing "public welfare"?  Israel's competition law on merger and acquisition prohibit mergers
that "substantially affect competition or injure the public through the price level, quantity or suppliedquantity".  Are these considerations also factored in when evaluating the "public welfare" criterion for
a restrictive arrangement?  Is there any leeway for the applicant to use the concept of "public welfare"
to shield a given sector against foreign companies?WT/TPR/M/58
Page 33
The Secretariat Report also highlights that "all monopolies (i.e. when a single enterprise supplies
more than 50% of the domestic output of a given product or service) are subject to legal restrictions
similar to those defined in the EU's Treaty of Rome".  Are there other criteria used to define a
monopoly, e.g. the number of companies operating in the sector concerned?
QUESTIONS BY CANADA
Agriculture, domestic support measures
(WT/TPR/S/58, page 84, paragraph 13)
The Secretariat Report states, "In addition to price support, ... deficiency payments and investment
programmes are operated by the Ministry of Agricu lture in support of horticulture, egg, poultry and
bovine meat production ..." In Israel's DS:1 noti fication for 1997, only vegetables benefited from both
deficiency payments and investment programmes.  We request details on the types of support
programmes that are provided for the respective products; for example, a list of programmes and theproducts that benefit from them, and the amount of support provided for each product, for the period
1995 to the present.  (The Report lists only the amount of total direct payments for 1995 to 1997 and
does not provide a detailed breakdown.)
(WT/TPR/S/58, page 85, paragraph 15)The Report states that "... other domestic support measures included support price schemes for
non-irrigated crops (such as wheat and sunflowers), for which prices were fixed according to different
regions;  and an insurance fund for natural disasters".  We note that there was no mention of any
support price schemes for wheat and sunflowers in Israel's notification.  We request details on how thesupport price schemes work, and the amount of support provided each product that benefits from the
scheme.  With respect to the insurance fund for natural disasters, please provide information on how
the scheme works, who administers it, what the eligibility criteria are, and what type of producers
benefit from the programme.
(WT/TPR/S/58, page 85, paragraph 16)
Do the production and marketing boards for agri-food products cited in this paragraph have any role
in controlling the imports of any agri-food products?  Is the insurance for natural disasters cited in this
paragraph different from the insurance mentioned in paragraph 15?  If so, how is this programme
funded and operated?  What role do these boards play in "dealing with exports"?
Trade policies and practices by measure:  Overview
With respect to paragraph 4 and pharmaceuticals, we understand there exists a fast-track process,
which reduces the amount of time in which an importer can be licensed to sell products in Israel.
Access to this process, which the United States currently enjoys, can effectively close the market tolater entries.  Does Israel have plans to offer this fast-track process to foreign exporters, other than the
United States.  If yes, how soon?
We also understand that Israel recognizes the U.S. FDA system for approvals of pharmaceutical
products.  Canada has a similarly developed system of approving the manufacture and release ofprescription and over-the-counter drugs, yet Israel does not recognize Canada's approvals.  To what
extent is Israel willing to offer the same treatmen t to national governments that meet Israeli standards
on pharmaceutical products?WT/TPR/M/58
Page 34
Competition policy and related issues
(WT/TPR/S/58, pages 58-62, paragraphs 77-87)
Could Israel provide information on the Restrictive Business Practices Commission's enforcement
activities over the past 1-2 years?
The Restrictive Business Practices Law was amended in 1998 to forbid abuse of dominance.  What
activities specifically constitute abuse of dominance under the law?  Does the law allow for the
establishment of a dominant position by an efficient firm due to better performance compared to other
competitors?
The Report indicates that the Commission is inde pendent (administratively) from the Ministry of
Industry and Trade.  Does the law provide for an independent advocacy role for the Commission?  If
yes, what have been the major interventions by the Commission over the last 1-2 years?  If no, what
mechanisms are available to enable the Commissi on to participate in privatization/deregulation
initiatives to ensure that reforms are pro-competitive?
Government procurement
(WT/TPR/S/58, page 73, paragraphs 115-117)
Can Israel explain how it proposes to stay within its 30% commitment on offsets, given the
implementation of an offset programme requiring 35% local content?
QUESTIONS FROM HUNGARY
Safeguard levies
We welcome that the coverage of safeguard levies decreased from 2.7% of tariff lines in 1992 to 0.8%
in 1999.  We note however that the rate of this levy differs depending on the country of origin and
would be interested to hear on what legal basis the different treatment is provided and what the
economic rationale is behind it.
Import of non-kosher meat and meat products
Paragraphs 28 on page 88 and 40 on page 43 of the Secretariat Report note that, since 1994 Israel has
implemented a complete ban on the import of non-kosher meat and meat products and maintainedvery restrictive certification requirements for foreign plants wishing to export their products to Israel.
At the same time the Government permits domestic production, sale and consumption of non-kosher
meat.  We would be grateful if the delegation of Israel could provide an explanation for this.
Government procurement
Paragraph 55 on page 52 of the Secretariat Report notes that as from early 1995 under Israeli law
every contract over 1.5 million shekel conclude d by government departments and fully owned
government companies must include an offset requ irement amounting to 35% of contract value.  This
requirement causes practical problems for some Hungarian companies especially those that arespecialized in the production of unique, non-series products for the manufacturing of which no
components or raw materials can be acquired in Israel.  We also note that though we run a trade
deficit with Israel the requirement is also applied to our suppliers.  As paragraph 115 on page 73 of
the Secretariat Report points out, Israel invoked developing country status under the GPA and may
thus require offset arrangements up to 35% of the contract, declining to 30% on 1 January 2001 andWT/TPR/M/58
Page 35
20% on 1 January 2005.  We would be interested to know the planned timetable and staging of the
offset ratio's decrease.
QUESTIONS BY JAPAN
Relations with the European Union(WT/TPR/S/58, page 19, paragraph 15)
It is reported that Israel has signed a new trade treaty with the EU, a Trea ty of Association, which
expands the parameters of the existing free-trade agreement.  Please explain the difference betweenthe former free-trade agreement and the new Treaty of Association.  Why has the notification not been
made to the WTO regarding the new Treaty of Association.
Foreign investment policies
(WT/TPR/S/58, page 26, paragraph 33)
It is reported that incentives to encourage fore ign investment, including investment grants and tax
breaks, are offered dependent on the location of the company as well as on the type of industry.Please explain the detailed criteria to benefit from such incentives.
(WT/TPR/S/58, page 29, paragraph 7)It is reported that some state-economic enterprises, including telecommunications, remain as
governmental monopolies.  On the other hand, according to paragraphs 118-128, pages 111-114 of the
Secretariat Report, foreign investment is allowed to some extent in this field.  Please explain further
Israel's policy on liberalizing the telecommunications market.  Does Israel have any intention to
further open this sector to foreign service suppliers?
Customs tariff
(WT/TPR/S/58, page 32, paragraph 22)
Israel has not completed its verification process regarding the introduction of HS 96.  Please explain
why the verification process has not been completed.  If any objection has been raised from any
country, please explain on which point such objection has been raised.
Safeguard
(WT/TPR/S/58, page 41, paragraph 36)
It is reported that so-called safeguard levies are collected on a number of imported goods in
accordance with the Trade Levies Law of 1991.  However, it is also reported that according to the
authorities, no safeguard legislation within the meaning of Article XIX of the GATT 1994 and the
Agreement on Safeguards and no such levies are in effect.  Please explain further on this point.
Please also explain why Israel has made no notification on the imposition of "safeguard levies" to theWTO.WT/TPR/M/58
Page 36
Border levies and charges (wharfage fee)
(WT/TPR/S/58, page 42, paragraph 37)
It is reported that, since 1995, Israel's port author ities charge importers 1.1% of the c.i.f. cost of
imports into Israel for the use of ports, whereas exporters using the same services are charged a fee of
0.2% on the c.i.f. value of containers.  Why are importers and exporters levied at a different rate?
The wharfage fee is calculated based on the c.i.f. value, regardless of size of a ship.  Please explain
the justification of such method of calculation in light of Article VIII:1(a) of the GATT, which
provides that, "[a]ll fees and charges of whatever character imposed by contracting parties on or in
connection with importation or exportation shall be limited in amount to the approximate cost ofservices rendered and shall not represent an indirect protection to domestic products or a taxation of
imports or exports for fiscal purposes".
Competition
It is reported in paragraph 79, page 59, of the Secretariat Report that Israeli legislation does not
provide for block exemptions but that a new bill containing amendments to the Restrictive Business
Practices Law includes provisions authorizing block exemptions.  Please explain the detail of the
amendment.
Privatization
(WT/TPR/S/58, pages 60-62, paragraphs 82-87)
In which fields are privatization initiated?  Is there any limitation for foreign capital to buy a share of
privatized companies?
SPS
A requirement that bovine meat exported to Israel has to come from cattle with a maximum age of 36
months is reported in paragraph 108, page 71, of the Secretariat Report. Does this requirement also
apply to domestically produced bovine meat?
It is reported that some 280 import standards that applied to various products were cancelled in
March 1998.  Do other mandatory standards, including quality requirements, which apply to foreign
goods but not to domestically produced goods, still exist?  If so, please explain how many standards
still exist.
IPR
Patents for medicaments
(WT/TPR/S/58, page 76 paragraph 126)
It is reported that where a similar extension has been granted in a country which is a Member of the
Paris Convention, then the Israeli extension will be  effective until the lapse of the first parallel
extension, but that in no case can the extension in Israel exceed five years.  Is this extensiondetermined regardless of the time needed for approv ing marketing of medicaments in Israel?  Why is
such extension granted only where a similar extension has been granted in a country which is a
member of the Paris Convention?WT/TPR/M/58
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Geographical indications
(WT/TPR/S/58, page 77, Table III.22)
Does Israel have any intention to revise the legislation regarding geographical indications?
Appellations of Origin Law, Merchandise Marks Ordinance and Trade Marks Ordinance seem to
cover geographical indications.  Which law or ordinance usually applies to protect geographical
indications?  If different a law or ordinance applies according to the kind of products, please explain
the scheme.  If protection for geographical indications is granted under the Trade Marks Law, is the
maximum duration of the protection no more than 21 years?
Textiles and clothing
(WT/TPR/S/58, page 99, paragraphs 62-63)
In this sector, it is reported that Israel is heavily dependent on imports of raw material and that the
textile items branch is more export oriented than other parts of the industry.  The average tariff onprocessed goods is as high as 20.6% and there seems to be a need to reduce such barrier.  Please
explain if Israel has any intention to reduce such import barrier in this sector, including reducing
import tariff rates.
MFN exemptions
(WT/TPR/S/58, page 100, paragraph 69)
Israel has listed MFN exemptions in the audiovisual sector and the banking sector.  To which WTO
Members and what kind of advantageous treatment does Israel actually provide under this list?  Pleaseexplain whether the conditions which created the need for the exemptions still prevail in these two
sectors?
Maritime transport
(WT/TPR/S/58, page 110, paragraph 113)
It is reported that Israel has no restrictions on maritime cabotage.  Are there no restriction either for
foreign flag vessels?  Are there no regulations, such as price regulations, on maritime cabotage?
QUESTIONS BY THE EUROPEAN COMMUNITY
General comments
First, the EC is concerned about the abnormal number of TBT and of anti-dumping investigations that
affect European Community exports to Israel.  Because of the relatively small size of the Israelimarket, none of these cases taken individually has a major negative economic impact for the
European industry.  However, taken all together, these measures could indicate the persistence of
some protectionist attitude aiming at giving an  unduly competitive advantage to Israeli industries.
This is particularly true for companies that enjoy a quasi-monopoly in Israel and that tend to try to
preserve their position on the domestic markets in Israel.
A second area of concern for the EC is that of intellectual property rights.  The Interim Agreement
between the EC and Israel foresees that after a transitional period of three years Israel should have
ratified a number of international conventions on IPR.  This transitional period elapsed inWT/TPR/M/58
Page 38
December 1998 and the EC would like to be informed on the progress that has been made in this
domain.
Also in relation to IPRs, the EC has on several occasions expressed its opposition to the recently
approved Israeli law on patents.  This law, according to our analysis, gives an unjustified advantage toIsraeli pharmaceutical companies by allowing the exploitation of a patent before the rights of the
patent holder have expired.  The EC intends to raise this issue before the appropriate instances of the
WTO.
Recently, the European disk recording industry has complained about local production and sales in the
internal market and growing exports from Israel a nd the Palestinian Authority of large and growing
quantities of piracy copies of CD.  The European Commission is currently investigating the case.
Customs procedures
(WT/TPR/S/58, page 31, paragraph 19)
What are the costs for obtaining kosher certificates?
Safeguard and research levies
(WT/TPR/S/58, page 41, paragraph 36)
What criteria does Israel use in deciding when to impose "safeguard levies"?  Why does the United
States receive a favourable rate?  What is the criteria for the imposition of research levies?
Wharfage fee
(WT/TPR/S/58, page 42, paragraph 37)
Both importers and exporters use harbour facilities and should be charged equally for the privilege.
Why, therefore, are importers charged 1.1% and exporters only 0.2%?
Indirect taxation
(WT/TPR/S/58, page 42, paragraph 39)
What steps are being taken towards the elimination of the "TAMA" discrimination especially in
relation to spirits?
Non-tariff border measures
Is it justified that Israel has implemented a complete ban on imports of non-kosher meat and products,
while the Government permits limited domestic production, sale, and consumption of non-koshermeat (see paragraph 40, page 43).
Is the import prohibition on beer with an alcohol content of 4.5-5% and a Stammwürze of 11-11.2%
still in force?
Are all the special import licensing requirements listed on pages 46-47 in the Secretariat Report
legitimate?WT/TPR/M/58
Page 39
Technical regulations and standards
(WT/TPR/S/58, page 67, paragraph 96)
Why is more use not made of international standards (25% of Israeli mandatory standards are
equivalent to international standards)?
(WT/TPR/S/58, page 72, paragraph 111)Why is the list of products subject to strict marking, labelling and packaging requirements only
available in Hebrew?  Would it not be more transparent to make such a list available in other
languages to assist companies considering exporting to Israel?
Protection of intellectual property rights
Can Israel give an assurance that their intellectual property laws will be TRIPS compliant by
January 2000?
What steps are being taken to combat copyright piracy in Israel?
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