China Desk Update | March 2016

China Israel Free Trade Agreement – Are We Ready For It?

Read article in Chinese –  中文

Israeli Prime Minister Benjamin Netanyahu and Chinese Vice Premier Liu Yandong announced yesterday that the two countries are committed to begin a free trade agreement negotiations.

As early as July 2013, Naftali Bennet, the Minister of Economy at the time, announced during his official visit to China that the two countries are making progress in the negotiations towards a free trade agreement. After Bennett’s visit the countries conducted a joint feasibility study on an FTA between China and Israel. There were also reports last year that an FTA was discussed by Chinese Ambassador Zhan Yongxin and the Israeli Ministry of Economy last year.

Is it possible that this time the two countries will reach a fruitful result? While it is, as always, difficult to tell, there are some positive indications that the discussions are gaining traction and that a China-Israel FTA may be on the horizon. At the beginning of this month, the Chinese Prime Minister announced that the negotiations towards establishing a free trade zone with Israel and the GCC (Gulf Cooperation Council) will continue. Although it is a known fact that the negotiations tend to take a long time and therefore are not a promise to the formation of an actual agreement, such as the GCC negotiations that have already began during 2004, it appears that during the past year the promotion of free trade agreements was accelerated and implemented by MOFCOM, China’s Ministry of Commerce. During 2015 China signed an FTA with South Korea, after two years of negotiations, and with Australia, after 10 years of negotiations. In addition, MOFCOM promoted substantial progress on the RCEP negotiations which would create the largest free trade zone in Asia, covering almost half the world’s population and nearly 30 percent of the world’s trade.

A free trade agreement breaks down trade barriers between nations and eases restrictions on exporting and importing goods and services such as tariffs, taxes and import quotas.  As a result, goods and services flow more easily within the free trade zone.

A China-Israel FTA would promote trade between the countries in goods and services by resolving issues such as: implementation of regulations and the removal of existing trade barriers for imports and exports, in addition to bilateral economic and technological cooperation. The agreement is expected to potentially double bilateral trade to $16 billion, increase investment and increase the GDP in both countries.

Is such free flow necessarily a positive thing? It can create efficiency in pricing goods and services and, at first sight, it may seem that cheaper goods and services are good for consumers. But China has a strong production capacity and a great low cost advantage which Israeli companies cannot reach. A great increase in the entrance of Chinese giants to the Israeli market may lead to greater dependence on Chinese companies and create a reality where local businesses are unable to compete and therefore, cannot survive.

However, as recent years already show, there is great synergy between China’s growing demand for the types of products and services that Israel excels at. The Chinese market is in constant search of quality and Israel has a good reputation for providing high value added products worldwide and specifically among Chinese consumers. Israeli companies can answer the demand for high-end products and services that Chinese consumers and are so eagerly seeking.

China’s population is growing older and even though the one child policy was amended, it will take time for the change to take effect. China is in great demand for products and devices which will improve the quality of life for China’s growing population of senior citizens. A China-Israel FTA will help many Israeli healthcare technology companies access a market estimated to include 500 million new potential customers.

With a population of just over 8 million people, the Israeli market is small and is heavily dependent on exports for future growth. Lifting barriers on exports to China opens up a huge potential market to the Israeli companies and may create an incentive for them to produce and export more. This in turn will cause a growing demand to working hands and create more jobs in the local market.

An FTA agreement can be mutually beneficial to both countries. It can enhance the framework conditions of economic exchange and cooperation and strengthen the bilateral trade and economic relationship between the two countries as well as the overall export capacity and competitiveness of both economies. However, ultimately, whether the benefits of the agreement will overcome its risks, will depend on the specific terms of the agreement that will be concluded after, what is expected to be, a very long negotiation process.

David Hodak heads the Tel Aviv law firm Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co. and the firm’s Asia Practice.
Eli Barasch heads the firm’s China Desk. His practice has focused primarily on China-Israel cross border transactions since 2004.
Adi Weitzhandler, Adv., an associate at the firm’s China Desk, has extensive experience in the Chinese market. She is conversationally fluent in Chinese and studied at the Beijing Language and Culture University, Beijing, China.

中以自由贸易协议-我们准备好了吗?

以色列总理本杰明.内塔尼亚胡与中国副总理刘延东昨天发表声明,宣布两国开展自由贸易协议谈判。

2013年7月,时任经济部长纳夫塔利班尼特在对中国展开正式访问时宣布,两国正在推动自由贸易协议谈判。班尼特访华后,中国与以色列开展了自由贸易协定联合可行性研究。去年,也看到很多关于中国驻以色列大使詹永新和以色列经济部之间自贸协议对话的报道。是不是有可能这一次,两国将达成富有成效的结果?但结果如何却一如既往的难以预测。

有一些积极的迹象显示也许这一次会成事。本月初,中国副总理宣布以色列和海合会自由贸易区谈判将继续。尽管海合会谈判早在2004年已经启动,但主要在过去的一年里,中国商务部促进加快实施了该谈判。

 在2015年,中国和韩国在经历了2年协商以及和澳大利亚经历了10年协商后达成并签署了自由贸易协议。除此之外,中国实质性地促进了区域性全面经济伙伴关系谈判,该区域性全面经济伙伴关系是亚洲目前最大的自由贸易区。覆盖了全球超过一半的人口。

自由贸易协定打破了国与国之间的贸易壁垒,减轻对出口和进口的货物和服务的限制,包括关税、进口配额和税收等。因此,商品和服务在自由贸易区内的流动更为容易。

该协议将包括诸如商品和服务贸易自由化,例如,除了双边经济技术合作之外,还有标准化、法规的实施、对现有的进口和出口贸易壁垒的消除。该协议预计将有可能将双边贸易额提高一倍到160亿美元,还能增加两国的互相投资,以及提高GDP。

这样的自由流动一定是一件好事吗?它可以提高商品定价和服务的效率,乍一看,似乎更便宜的商品和服务对消费者有利。但中国拥有强大的生产能力和巨大的低成本优势,以色列的公司无法企及。在中国巨头进入以色列市场可能导致对中国企业更大的依赖性,并造成本地企业无法竞争,因此也无法继续生存。

然而,最近几年的情况表明,中国的需求和以色列的能力,从优势互补角度可以产生巨大的协同效应。中国市场不断追求更高的质量,而以色列在高附加值产品方面,在世界范围内,特别是在中国消费者中有良好的信誉。以色列的公司能够解决中国消费者急切寻求的高端的需求。

即使独生子女的政策发生了改变,中国人口老龄化的问题仍然存在。政策改变带来的影响需要时间才能产生效果。中国在对能为越来越多的老年人提高生活质量的产品和设备需求上越来越大。在以色列,在医疗保健领域有许多科技公司面对着一个估计拥有5亿新潜在客户的市场机会。

在以色列,本土市场并不大。对中国的出口的放宽为以色列公司开辟了一个潜力巨大的市场,也可以为他们创造生产和出口带来更多的激励。这将带来不断增长的需求,在当地市场创造出更多的就业机会。

 自由贸易协议会带来两国互利。它可以加强经济交流与合作的框架条件以及加强两国的双边贸易和经济关系以及两国经济的整体出口能力。但是,该协议的好处是否可以克服风险和潜在的缺点,将只取决于协议结束后的具体条款,预计这将是一个非常漫长的谈判过程。

虎大为(David Hodak), 律师,Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co.(GKH)律师事务所领导人,领导GKH亚洲业务,并带领其事务所在中国及香港发展了合作关系。
艾力•巴拉施(Eli Barasch), 律师, 主管GKH律师事务所中国业务部,其业务自2004年起主要关注中以跨境交易。
艾迪(Adi Weitzhandler)律师, GKH律师事务所中国方面业务的律师,其拥有与中国市场合作的资深经验。艾迪能够流利进行普通话对话,曾在中国北京语言大学学习。

Adv. Anat Klein on the Supreme Court’s rejection of the gas framework | 27/3/2016

The Supreme Court suspended the ruling for a year to enable the parliament to amend the agreement. The panel said in their ruling “We have decided to cancel the gas deal because of the stability clause” that would have barred future governments from altering the deal.

Adv. Anat Klein explains why the stability clause is not very limiting, and this ruling might harm the public interest (Hebrew):

Read on NRG website

Read on New1

Rashet Bet, from ’40:49

Channel 10: Layla Calcaly:

Adv. David Hodak: Cap on seniors’ salaries requires further examination | 27/3/2016

Head of firm, Adv. David Hodak, explains why the cap on seniors’ salaries might create a dangerous precedent, and must therefore be postponed until further discussion, thus enabling a more extensive examination of the bill, which is flawed in many aspects (Hebrew):

Read on Calcalist online

Calcalist print edition:

Calcalist27.3.2016

Read on Maariv online

Maariv print edition:

Maariv27.3.2016

Read on TheMarker online

TheMarker print edition:

TheMarker27.3.2016

Read on MSN online

Yedioth Aharonoth print edition:

YediothAharonoth27.3.2016

 London et Kirschenbaum:
The Israel Insurance Association decided to take action as well, and sent similar claims to those that were raised by Adv. Hodak’s letter
An additional letter sent by attorneys Hodak and Ofer Hanoh refers to “…other elements of the law, including pension components, that will leads to its impact not only on banks’ seniors but on other employees as well, that are entitled to compensation by the power of employment contracts. This will mean failing to withhold existing contracts…”