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U.S. Aid to Israel
The same agreement has also called for helping Israel’s arms exports penetrate foreign markets. Since the U.S. market is the largest in the world, Israel’s arms industry has embarked on a major campaign to penetrate the American market. Some of the many approaches include:64 (a.) direct marketing in the U.S., including opening U.S. subsidiaries; (b.) partnerships with U.S. firms, either for joint development of systems or in order to use American firms to market Israeli products in the U.S.; (c.) raising additional capital by going public and trading in U.S. stock markets; and (d.) seeking the help of U.S. firms in marketing to the Third World. As a result, high-tech Israeli exports, which had been produced using American technology and capital, began to compete with U.S.-made goods. In its continuing efforts to stabilize Israel’s shaky economy, the Senate Foreign Relations Committee furthermore adopted in 1984 a number of measures specifically designed to provide Israel with the kind of help it badly needed. Those measures included providing ESF assistance at the beginning of the fiscal year rather than spaced out over the entire year, permitting Israeli firms to bid on Agency for International Development (AID) contracts in other AID recipient countries, and voting to establish the principle that the annual ESF allocation will not be less than the annual debt repayment to the U.S. Israel’s failed efforts to gain the influence it hoped for in most Third World countries, especially after 1973, motivated the U.S. to lend its prestige and resources to facilitate Israel’s penetration of many African, Asian and Latin American countries. The U.S., recognizing the value of the foreign aid program as an effective instrument of foreign policy, provided Israel with the special funds it needed to start its own foreign aid program. The 1986 foreign aid package, for example, included a $5 million grant to support Israel’s foreign assistance program. In 1985, the U.S. and Israel signed two grants totaling $1.4 million to assist agricultural development in the Dominican Republic, Jamaica, Antigua, Honduras, El Salvador, and Costa Rica.65 While such funds have not been substantial, the opportunities they helped open were very substantial. Israel’s established policy for attracting more Jewish immigrants is also supported by the U.S. Government. The FY 1988 Foreign Aid Bill allocated $25 million for Soviet and other East European Jews emigrating to Israel. This program continues despite the fact that only a very small fraction of Jews leaving the Soviet Union actually go to Israel. Between 1971 and 1987, the U.S. provided Israel the sum of $329 million for this purpose,66 a good portion of which has been diverted to support Jewish settlements in the West Bank and Gaza Strip. In 1988 and 1989, $50 million more was given. In addition to the above, the U.S. government and American corporations have over the years invested billions of dollars in Israel. Between 1966 and 1974, in particular, the U.S. government invested a total of $481.5 million in 56 different projects.67 Other annual aid programs such as Export-Import Bank loans, Housing Guarantee loans, American Schools and Hospitals Abroad grants, and Commodity Credit Corporation loans provide substantial assistance to Israeli institutions. Such loans, which are usually extended at concessionary rates of interest and are payable over 30-40 years, had reached approximately $2 billion by 1986. Export-Import Bank loans, for example, exceeded $1.2 billion; Housing Guarantee loans $200 million; and commodity Credit Corporation loans $18 million.68 Grants given to Israeli institutions were about $100 million, $80 million of which went to Israeli schools and hospitals.69 American schools and hospitals in Israel received about $76 million between 1970 and 1986, or some 20 percent of the total granted to all American schools and hospitals in Africa, Asia, Europe and Latin America. American schools and hospitals in Israel, however, are not necessarily American, though some are American in name. It is no secret that almost all of them are Israeli institutions incorporated in the U.S. so they may qualify for U.S. grants and subsidies. Commercial loans by U.S. banks are also another source of significant assistance to Israel. Such loans, of which deposits placed with Israeli banks represent a major portion, are estimated at $2 billion per year. The Free Trade Area The FTA agreement, completed in 1985, calls for the elimination of duties and non-tariff barriers on all trade, including services, between Israel and the U.S. by 1955. However, the agreement embodies certain provisions that will permit Israel to extend some restrictions and tariffs on certain American products. The agreement moreover guarantees Israeli arms companies—almost all of which are government owned and subsidized—equal status with U.S. firms for sales of military equipment to the U.S. Department of Defense. Article 11 of the FTA permits Israel to retain or raise duties on imports if it feels “threatened by, or suffers from a serious balance of payments deficit.” It must be noted, however, that Israel has had a chronic balance of payments deficit since its inception. In fact, the deficit, which exceeded $3.4 billion in 1988, is so serious that Israel stands no realistic chance of being able to close it in the foreseeable future. Because of its apparent disadvantages, the FTA was opposed by American manufacturers, farmers and labor unions. Even the AFL-CIO, which historically has been the strongest Israeli supporter within the American labor movement, testified against the FTA bill.
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