Impasse in free trade talks as Israeli concerns grow over Indian IT influx

The first disagreement stemmed from a cap on the movement of Indian IT professionals in Israel due to the country’s low labour absorption capacity. The issue assumed significance as the negotiations were largely centred around the services sector, with most goods trade having already been liberalized.

“The problem is the size difference. India expects Israel to allow Indian IT workers to work in Israel. Israel cannot allow too many because of its internal unemployment issues. Israel just gave India an allowance of 42,000 workers—34,000 for construction and 8,000 caregivers," said one of the persons cited above.

This person said both the minister of economy and foreign affairs of Israel visited India recently and “the FTA (free trade agreement) is still a matter to discuss".

“An FTA at the moment is challenging due to a wide gap in the size of the economies of the two countries. And an agreement would largely be in Israel’s favour so it is not in India’s interest to go ahead with the same," the other person said. Trade experts said an FTA between the two countries could prove to be crucial for Indian agriculture as the Israeli agri- tech industry is fairly advanced and could help India achieve greater efficiency and productivity at a time geo-political tensions and climate change have posed food security challenges.

Sunitha Raju, professor at the Indian Institute of Foreign Trade said: “India should not be only focused on movement of IT workers. India should leverage Israel’s expertise. Israel is known for its adaptive, productivity enhancing agriculture technology. We should negotiate for access to this technology that can help us to upgrade our water resources and agricultural productivity."

The Indian economy is the world’s fifth largest with a gross domestic product of $3.5 trillion while Israel’s is roughly the size of $500 billion. While Indian exports to Israel in calendar year 2022 stood at $7.59 billion, Israeli exports to India were $3.94 billion as per the UN’s COMTRADE database on international trade.

Indian exports were driven by petroleum products, which comprised 65% of total exports in FY23. Other traditional exports such as gems and jewellery, engineering goods, electronic goods and pharma exports surged 35-115%.

Israeli stakeholders agreed the two countries should break the logjam. “The parties should not give up on the FTA discussions, or other trade agreements. The partnership between India and Israel is strategic, thus, viewing the FTA through pure economic glasses is not right. I am sure that the parties can reach even a partial agreement that can progress the bilateral trade to greater heights. We are touching the $10 bn mark and it can easily reach $15 bn, if only an FTA or other trade agreement is signed," Anat Bernstein-Reich, President, Israel-Asia Chamber of Commerce said.

During his visit to India in May, foreign minister Eli Cohen spoke about Israel’s intention to pursue an FTA with India. Cohen spoke of boosting bilateral trade volumes to $20 billion.

He also said Israel could act as a bridge between the East and West by ferrying Indian goods from the Indian Ocean and sending them forward to European markets.

Talks for an FTA have been on since 2010, when the first round of negotiations were held in New Delhi.

Queries emailed to the commerce and industry ministry, ministry of external affairs and Israel’s embassy in New Delhi remained unanswered till press time.