FTA Between Israel and UAE – Two Years since the Abraham Accords

FTA Between Israel and UAE – Two Years since the Abraham Accords

The United Arab Emirates (UAE) and Israel normalised diplomatic relations in September 2020 by signing the Abraham Accords. Since then, the two countries have engaged in a range of cooperation projects, in the area of energy among others, in addition to opening embassies in their respective countries.

Recently, relations between the two countries have taken another new turn. On 31 May 2022, Abu Dhabi and Tel Aviv signed a Free Trade Agreement (FTA). The terms of the deal are yet to be revealed and its enforcement is pending review by the Israeli parliament and ratification by the government. However, once it enters into force, the FTA will be the most comprehensive trade agreement between Israel and any Arab state.

The agreement will eliminate customs duties on 96% of the goods traded between the two states within five years. According to Orna Barbivay, the Israeli Minister of Economy, the value of trade between Abu Dhabi and Tel Aviv amounted to USD 885 million in 2021 and the Emirati Ministry of Economy indicated that the FTA could lead to a ten-fold increase in this amount and reach USD 10 billion within the next five years. The FTA is expected to greatly facilitate trade in healthcare services, medical equipment, plastic products and fertilisers, consumable goods, and jewellery. According to an official Israeli statement, the FTA will also allow for enhanced collaboration on intellectual property rights, patents and copyrights in the fields of agriculture and technology, among others. On foot of this agreement, both Israeli and Emirati companies would also be authorised to respond to calls for tenders from both governments.

Negotiations for the signing of an FTA began during Israeli Prime Minister Naftali Bennet’s visit to Abu Dhabi in December 2021. The Prime Minister called the agreement “historic”, adding that the deal with Abu Dhabi is “the fastest FTA to be signed in Israel’s history”. Mohamed Al Khaja, the UAE Ambassador to Israel, was equally as enthusiastic, calling the FTA an “unprecedented achievement.

The Future of the Abraham Accords

During a conference entitled "The Future of the Abraham Accords” held at the World Economic Forum (WEF) in Davos in late May, Dr. Thani bin Ahmed Al Zeyoudi, UAE's Minister of State for Foreign Trade, had already stressed that the volume of trade between Israel and the UAE had exceeded USD 2.5 billion since the normalisation of relations between the two partners. This trend is expected to continue in the foreseeable future. “Only in the first quarter of 2022, we already exceeded USD 1 billion, which means this year we're going to exceed USD 2 billion," Al Zeyoudi said. 

These figures are notably due to the numerous agreements signed between the two countries over the past two years. The UAE and Israel have concluded no fewer than 65 partnership agreements and Memoranda of Understanding (MoU) since 2020. More than 1,000 Israeli companies are also set to soon start business operations in the UAE while “some of the offices for [the UAE’s] main sovereign wealth companies [are already] based in Israel,” Dr Al Zeyoudi added.

The trade volume is expected to reach USD 5 billion over the next few years, an increase that will be greatly facilitated by the FTA signed on 31 May.

Bahrain, Another Partner in the Gulf

During the conference in Davos, former Bahraini foreign minister Khalid bin Ahmed Al Khalifa stressed that relations between Israel and Bahrain, which signed the Abraham Accords alongside Abu Dhabi in September 2020, were also in good shape. Cooperation projects between the two partners are increasing, notably in the military field, as evidenced by the recent visit of Benny Gantz, the Israeli Defence Minister, to Manama in early February 2022.

The former minister also took the opportunity to reiterate Bahrain's support for the Palestinian people, arguing that the Abraham Accords were concluded "without prejudice to our position regarding the Palestinian people." The former minister underscored that the provisions of the Arab Peace Initiative, a peace proposal drawn up in 2002 by the Arab League, already represents “de facto acceptance by every Arab country of the State of Israel in the region. We were approaching Israel as a country in the region to make peace with. We did not give this offer to the US, who has always been a helpful interlocutor, we gave it directly, publicly to Israel.

In a context of slower economic growth and unprecedented inflation rates, economic and commercial prospects appear to represent a main trigger for normalisation of relations with Israel. According to The Wall Street Journal, several Israeli entrepreneurs are in talks with Saudi Arabia for investments in high-tech companies, despite Riyadh having made no announcement regarding its intentions to normalise diplomatic relations with the Jewish state.

Learn more about the Abraham Accords and the Middle East Peace Process: