When it comes to world trade, and technology trading in particular, Israel has played a game of ‘piggy in the middle’ with China and the US very successfully. Israel has many lucrative trade deals with both the US and China, importing and exporting technology and other goods. But the export of tech to China throws up some security concerns for the US, since technology imported from Israel could potentially provide China with access to sensitive information and could even present opportunities for China to spy on the US.
Historically, Israel sold military technology to China, including navigation systems, missiles and radar since the 1980s. These trade deals grew throughout the 1990s, despite accusations that Israel supplied China with some highly sensitive technology. Such deals were blocked by the US in 2000 and 2005, amid concerns about China’s access to AEW (Advanced Early Warning Systems). This damaged Israel’s relationships with China and ended supplies of military technology.
The US and Israel collaborate on military technology, and have processes ensuring sales of arms do not end up in the wrong hands, so it is not surprising Israel agreed to end military trade with China. Israel also receives significant investment from the US – $3bn of military aid.
Despite this, Israel still has strong trade relationships with China. Since 1992, imports from China grew from $12.8 million to a staggering $8 billion. Similarly, Israel’s exports to China have grown from $38.7 million to $3 billion.
China aspires to become the global superpower, gaining influence across African and Middle Eastern countries to steal the crown off the US. The US is China’s biggest competitor, trying to fend off its takeover. Yet the US is a strong ally of Israel, making Israel’s trade relationships with China a delicate balancing act. This balancing act is becoming increasingly precarious as President Trump’s US trade war with China continues.
Meanwhile, China is investing in Israeli companies, and even aiming to buy some of them out, for example ADAMA Agricultural Solutions and also Tnuva dairy. China has recognised Israel as a key target for lucrative technology trade deals as it has become such a hub of innovation. This close tech relationship between Israel and China could become a growing concern for president Trump. China is investing in Israel’s infrastructure to improve its trade links, including the Tel Aviv rail construction and ports at Haifa and Ashdod.
China’s investment makes Israel’s construction and infrastructure projects less costly, and Israel’s trade deals enable China to diversify its trading portfolio. In 2017, Israel’s Prime Minister, Binyamin Netanyahu struck ten new trade deals, and in May this year China played host to 100 Israeli startups at a business event. In 2015 China and Israel’s universities signed a deal to work together on research and development projects.
This close relationship in trade and industry is at odds with political relations. Technology trade deals potentially have dual purpose, for business and military gains, yet Beijing is building relationships with Iran, Israel’s enemy.
Israel could lose out on important trade relationships and investment from the US in future if it continues to support China’s bid for world domination. It risks accusations of putting profits ahead of security concerns. Israel walks an increasingly tricky tightrope as the current trade war continues.