TWO WAY STREET: Israel Gives Much More to the U.S. Economy Than You Imagined
From manufacturing to medical research, the Jewish state is crucial to the economic health of the U.S.
The movement to boycott, divest from, and sanction Israel (often referred to as BDS) hopes to economically isolate the Jewish state to the point that it is pressured into permitting the creation of a Palestinian state under conditions that would threaten Israel’s security and even its very existence. Those of us who fight against this support Israel’s right to exist and are usually motivated by religion, a specific worldview, or a moral code. But when boycotts hurt Israel’s economy, they hurt America as well. Israel makes massive and often unknown contributions to America’s economy and quality of life. If the boycott movement were to achieve its aims, Americans would lose regardless of their position on the Arab-Israeli conflict. In the last few presidential election cycles, the economy has ranked among the top two most important issues to voters, and this year will likely be the same. This means that this fight is much bigger than the pro-Israel community, and the coalition to fight boycotts of Israel should expand to include those concerned about American domestic policy as well. Americans needs to understand that this hurts them too.
The U.S.-Israel alliance is expansive. Pro-Israel advocates understand that the alliance contributes to America’s security and its position as a moral, democratic leader in the world. Decades of polling show Americans outside the foreign policy establishment support Israel because of the democratic, liberal values shared by our two nations. But the alliance is much deeper than that. As of December 2015, according to the World Bank, Israel is the 37th largest economy in the world by gross domestic product (GDP), an extraordinary accomplishment for such a young and perpetually beleaguered nation. But last year Israel was also America’s 23rd largest trade partner. From Israel, America receives unusually high amounts of investment; helpful and profitable technologies and services; and advancements in science, agriculture, the environment, and healthcare that improve the quality of and, in some cases, quite literally save our lives. Our exports to Israel create jobs in America. Through Israeli innovations and collaboration, our scientists and medical professionals become smarter and more effective at their jobs, and our agriculture and environmental sectors become more efficient and productive. The impact of the alliance is as wide as it is deep.
In the summer of 2014, the Israel Allies Foundation (where I am Director of Congressional Affairs) was planning the launch of a massive effort to combat the anti-Israel boycott movement through state legislatures. At the same time, we were considering what needed to be done in Congress to support that effort, so I convened a meeting with staff from six congressional offices, three Republican and three Democratic, several of them senior, and all of them pragmatic supporters of Israel and human rights. We talked about the inherent anti-Semitism that drives the movement, and concluded that the movement was doing and would continue to do more harm to the Palestinian cause than good. Above all, we agreed that it must be stopped.
Toward the end of the meeting, a staffer raised their hand and asked if there was any positive argument to be made against it—that is, is there more to combating boycotts than beating the anti-Semites and supporting Israel? Thus began a project that led to House Resolution 551, “Recognizing the importance of the United States-Israel economic relationship and encouraging new areas of cooperation.”
HRes 551 was introduced by Rep. Ted Lieu (D-Calif.), whose leadership attracted three very powerful co-sponsors: House Foreign Affairs Committee chair Rep. Ed Royce (R-Calif.), the committee’s ranking Democratic member, Rep. Eliot Engel (D-N.Y.), and the chair of the Subcommittee on Terrorism, Non-Proliferation, and Trade, Rep. Ted Poe (R-Texas). At the time of this article, it had attracted 81 co-sponsors and passed through the Foreign Affairs Committee unanimously.
The resolution notes a number of successes in the U.S.-Israel alliance:
• The U.S.-Israel free trade agreement (FTA) was America’s first FTA when it was signed on April 22, 1985.
• Over the following 30 years, trade has multiplied tenfold to over $40 billion annually.
• Through government-funded U.S.-Israel collaborative research and development programs in science, energy, agriculture, security, technology, and numerous other areas, America has become a more environmentally friendly, healthier, better fed, more advanced, and financially stronger nation. The lives of people in America and Israel have been tangibly improved because of the two countries’ alliance.
The reason Congress spent time on HRes 551 was simple: America derives critical and unique benefits from its economic relationship with Israel. The findings of the resolution lead to two important conclusions: First, the U.S.-Israel economic relationship matters. Second, targeting the Israeli economy also targets the American economy, with potentially devastating results that reach beyond economics and into basic quality of life. Understanding how this negatively impacts America’s economy becomes easy once the full extent of the economic connections between Israel and the US, and the benefits from them, are made clear. And once that understanding is reached, it becomes painfully obvious why every American should oppose boycotting Israel.
The U.S.-Israel alliance’s backbone is the two countries’ macroeconomic ties. America has FTAs with twenty countries. Through our exports to those countries, 17,638,294 American jobs were directly supported between 2009 and 2014, according to the Department of Commerce. Of that total, trade with Israel contributed 254,562, the eighth-largest contribution among the 20 trade partners. When the data is further examined, however, it turns out that exports to Israel generate the highest amount of export dollars per job.
While Israel’s economy does not offer the sheer volume of market opportunities for American products and services that FTA partner economies like Canada, Mexico, and Australia do, the quantity of export dollars generated by each American job supported by trade with Israel is far more significant than those larger economies on a per job basis. As demonstrated in the graphic below, US jobs supported by exports to Israel represent the highest value per job of any of the 20 free trade partner countries. This number is found by taking the dollar amount of trade between the U.S. and a given country, then dividing it by the number of jobs supported by that country.
One reason that U.S. jobs supported by exports to Israel provide so much bang for the buck is the nature of the goods and services provided. It is no secret that Israel has one of the most advanced economies in the world. The “Startup Nation” is among the world’s top innovators and its work touches the lives of people around the globe in nearly every imaginable sector: Mobile and computing technology and services, healthcare, food and agriculture, scientific research and development, water, environmental protection, and defense. And as citizens of an advanced nation, Israelis are also users of these advanced technologies and their applications. This makes the Israeli market ripe for the kind of exports that create and sustain high-paying jobs in America. The top American export categories to Israel by dollar value in 2014 are among those considered blue- and white-collar industries: Precious stones, electrical and mechanical machinery, aircraft, and optic and medical instruments.
Another reason high-paying American jobs are tied to trade with Israel is the amount of foreign direct investment Israel sends to America, which is primarily concentrated in the human capital-heavy manufacturing sector. According the Organization for Economic Cooperation and Development, Israel’s cumulative investments in the United States through 2013 are more than economic giants like China, India, Russia, Hong Kong, and Brazil, not to mention major oil producer Venezuela, mutual defense treaty partner Taiwan, and all of Africa’s individual countries. Inasmuch as foreign investment factors into American foreign policy, this consideration should rank higher for Israel than any of those countries, which is a striking statement when you consider how much leeway countries like China, India, and Russia in particular receive from our government on human rights concerns the boycott movement claims to care about.
We have data on the impact of the economic relationship with Israel on individual states as well. Every state in the union has its own economic ties to Israel. At the very lowest level of economic engagement, Alaska still did over $287,000 in trade with Israel as of 2014, not to mention the more than $2.7 million received in 2012 alone by the Alaska defense industry in purchases made through Foreign Military Financing (FMF) provided by the U.S. to Israel through bilateral assistance.
At the top end of state economic ties with Israel is New York, which enjoyed over $6.3 billion in trade with Israel in 2014, making Israel its fourth-largest trading partner. Five years prior, the state signed a memorandum of understanding with Israel that builds industrial cooperation and provides assistance to companies seeking financial support for research and development projects, while also establishing information and personal exchanges in nanotechnology, biotechnology, and security. Major companies operating in New York like GE and Eastman Kodak count Israel as an important market, while medical companies like J. Jamner Surgical Instruments consider Israel a key market because of the high value Israel places on providing quality health care to its citizens.
The 48 states between New York and Alaska have similar stories to tell: Profitable economic ties that sustain many jobs. This is one of the main reasons these states are adopting laws that prevent their taxpayer dollars from going to companies and pension investment funds that participate in anti-Israel efforts. Last year, South Carolina adopted the first law in the country that requires companies seeking contracts with the state to certify that they will not participate in boycotts, divestments, or sanctions on the basis of national origin for the duration of the contract.
South Carolina did over $120 million in trade with Israel in 2014, 22 percent more than the year prior. Several companies in the state received substantial business through FMF, including Zephyr International LLC, Woven Electronics, and North American Rescue. Terex Cranes sells construction cranes and lifts to Israel. Amida Industries exports its mobile floodlight towers and has a local agent located in the Jewish state. Carolina Steel and Wire Corporation, Kigre, Inc., and Clark-Schwebel Fiber Glass Corporation are just some of the more than 30 South Carolina companies who do business in Israel. The economic considerations are substantial enough to have compelled the state to protect these ties through public policy.
However, the South Carolina law is about more than just dollars and cents. It is an extension of the values of the state’s citizens, and this was one of the reasons why the Israel Allies Foundation launched its national effort to pass state-level anti-boycott laws in South Carolina. The scope of the South Carolina law covers national-origin discrimination and other categories like race and gender. Because it is not Israel-specific, the law makes clear that South Carolina is uncomfortable with the concept of discriminatory business practices in multiple contexts. The boycott-Israel movement is an inherently discriminatory movement because it targets Israel, the only Jewish state, on charges that are far more appropriately applied to other countries. The movement’s inherent racism is given away by its use, sometimes deceptive and other times plainly overt, of anti-Semitic arguments, tropes, and images, which belie its claims of seeking “justice.” The South Carolina law is at its core a means of protecting the state’s citizens from unwittingly supporting discrimination, and while it is most obviously applied to efforts against Israel, it is written so that it can be adapted to other discriminatory efforts.
Trade with Israel is crucial to many states’ economies, which explains why so many are passing laws to prevent boycotts from occurring.
Shortly after South Carolina Governor Nikki Haley signed the bill into law, Illinois Governor Bruce Rauner signed a bill that forbids state and local pensions from investing in parties who promote boycotting Israel. Illinois maintains ten foreign trade offices abroad, one of which is in Israel. At the 2015 Water Technology and Environmental Control Exhibition and Conference in Tel Aviv, the Illinois state government ran a pavilion to showcase Illinois companies. Illinois sent nearly $200 million worth of exports to the Jewish state in 2014. And, like South Carolina, the ties go deeper than money. In just one example, the University of Chicago signed a memorandum of understanding with Israel’s Ben-Gurion University in March of 2013 that formalized a number of joint research partnerships, including one that focuses on developing water production and purification technologies that can be sent to regions around the world where fresh water resources are lacking. The purpose of this U.S.-Israeli project is to combat what many predict will be one of the next, and extremely devastating global humanitarian challenges: Water scarcity.
It is quite telling that two very different states, liberal Illinois and conservative South Carolina, decided independently to enforce their citizens’ desire to oppose the bigoted practice of economic boycotts motivated by ethnic and religious discrimination. Shortly after the successful effort in South Carolina, the Israel Allies Foundation began laying the groundwork in Florida for passing what would be another historic step: A law that combined the contracting provision of South Carolina law with the pension provision of Illinois law. On February 24, Florida made history by passing it. This combination law is the strongest legal statement on the subject yet made by any government, state or federal. In 2014, Florida had the fourth-highest gross domestic product of any state, ranking one slot ahead of Illinois (South Carolina ranked 27th). Combined, these three states represent 18.5 percent of U.S. GDP. Their individual decisions to signal their support for Israel send a very strong collective message that anti-Israel movements must be combated.
The anti-discrimination movement will not end in Florida. Working with its partners, the Israel Allies Foundation has worked to introduce legislation in New York (over $6 billion in exports to Israel in 2014), California (over $2.3 billion), Georgia (over $250 million), Arizona (over $234 million), and Iowa (over $40 million). These states, combined with the three that have already passed laws, account for 32 percent of America’s trade and over 37 percent of U.S. GDP—and these are just the states that have gone public with their bills. At the time of writing, there are more in the works.
Congress and federal court rulings support what the states are doing. The Export Administration Act (EAA) of 1977 and the Ribicoff Amendment to the Tax Reform Act of 1976 were both explicitly designed to combat the Arab League’s boycott of Israel, and these acts extend to secondary and tertiary boycotts of firms doing business with Israel—as is being attempted today. The boycott-Israel movement’s main tactic is the politicization of America’s economic engagement with Israel, but the EAA is a particularly strong statement in support of depoliticizing U.S. trade. This sets the movement against official U.S. policy.
The findings and declarations contained in the EAA, which lay out the rationale and importance of the binding legal changes the law makes, echo sentiments that were critical to healing a broken Europe following World War II. They are as important for the world today as they were then.
During the first half of the 20th century, European countries implemented a variety of trade barriers and engaged in currency wars as a means of achieving political and military objectives. This was particularly the case in the 1930s. Franklin Roosevelt and Winston Churchill believed that these economic conflicts strongly influenced the drift toward world war. The two leaders thought that economic cooperation needed to be encouraged in order to avoid future conflict. Understanding that cooperative economics build cooperative politics, Roosevelt
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