UK-Israel Trade Negotiations

Ian Paisley Excerpts

Thursday 20th January 2022 Westminster Hall

[Ian Paisley (in the Chair)]

Before we begin, I remind Members that they are expected to wear a face covering when they are not speaking in the debate. This is in line with the current guidance that the House of Commons Commissioners would like to be enforced.

I also remind Members that they are asked by the House to take a covid lateral flow test before coming on to the estate. Please also give each other and members of staff space when seated, and when entering and leaving the room, where possible.

[Bob Blackman (Harrow East) (Con)]

I beg to move,

That this House has considered UK and Israel trade negotiations.

It is a pleasure to serve under your chairmanship, Mr Paisley, which I think is for the first time.

I declare my interest up front: I am the chairman of the all-party parliamentary group on Israel. In the last year, we released an excellent report, which I commend to my hon. Friend the Minister, on the health tech part of our industries. It is a very good read, which demonstrates the importance of Israel-UK negotiations and having them set up. Moreover, we are just about to release a report on research and innovation, which I also commend to him.

Israel and the UK’s partnership on the technology front extends to the fact, of course, that we have the Israel tech hub in the embassy in Tel Aviv. This morning, I was talking to the all-party parliamentary group on Romania, which wants to mirror that tech hub, demonstrating that the relationship between the UK and Israel is not only good for the UK and Israel but means that we can set up similar arrangements for like-minded countries across Europe and across the world. So I welcome the Government’s commitment to further strengthening the ties with Israel, which of course is a close friend and ally of the United Kingdom.

It is of course timely that we are having this debate, because I know that very shortly we will embark on new trade talks to enhance the UK’s trade relationship with Israel still further, which is extremely welcome.

I also thank the Backbench Business Committee, on which I sit, for granting this debate. I am not sure whether my sitting on the Committee had anything to do with it; I suspect that possibly it did. And I note that the hon. Member for Strangford (Jim Shannon) is here in Westminster Hall today; he has a season ticket to the Backbench Business Committee, as well. [Laughter.]

Israel is not just the sole democracy in the middle east; it is also a true global high-tech start-up powerhouse, with huge prowess in the fields of high-tech energy, medical science, fintech and cyber-security, to name but a few areas. The UK is Israel’s largest trade partner in Europe and its third largest trade partner in the world. That gives us something to aim at; we want to be Israel’s largest trade partner in the world.

Given the strength of our relationship, it is perhaps little surprise that Israel was among the first countries with which the UK agreed a free trade agreement in principle, in January 2019, on our departure from the EU. After successive record-breaking years, UK-Israel trade has remained healthy, even during the pandemic, with an estimated value of £5 billion. Whether it involves pharmaceuticals, plastics, fintech or agri-tech, the UK-Israel trade relationship covers all our major industries and has a natural focus on the technology and services of the future. That is a key reason why there are boundless opportunities for improvements in the UK-Israel trade relationship. The signing of a strategic agreement with Israel last November was an important point in the process. In our ever-strengthening bilateral relationship, that is the next step towards negotiating the full post-Brexit trade deal with our friends in Israel that we want to see.

So we are natural trade partners. As progressive liberal democracies, our nations share the same values and the same commitment to the open and free market. Israel’s business community regards the UK as the gateway to Europe. The UK is an appealing market. We have a shared language, as an estimated 85% of Israelis speak English as their first language. We are also obviously in close proximity to Israel and have an enterprising business culture.

Israeli businesses hold the UK market in the highest regard. We have seen many of them achieve great success here. I will mention one or two of them shortly. Israel’s tech ecosystem does not just provide economic benefits to our two great nations. Every day, Israeli businesses will be enriching and improving the lives of British citizens and making them healthier. A cab driver or parent on the school run uses Israeli sat-nav app Waze to efficiently complete their journey. A water engineer will be alerted to a leak in the network by Takadu, a start-up based in Tel Aviv. The cherry tomatoes that a shopper buys in the local supermarket are an invention from Israel. I could go on. Many constituents of mine are issued generic prescription drugs from their local GP surgery. These drugs are manufactured by Israeli pharmaceutical giant Teva, which produces an extraordinary one in six prescription drugs used in the NHS. That fails to scratch even the surface of Israeli companies operating in the UK.

There are 500 Israeli companies operating in the UK, employing thousands of our constituents. A number of UK companies have major operations in Israel, including Barclays, Rolls-Royce, GlaxoSmithKline and Unilever. Rolls-Royce was responsible for the UK’s largest ever export deal to Israel back in 2016 when it signed a £1 billion agreement with Israeli airline El Al to provide Trent 1000 engines for El Al’s new fleet of Dreamliner aircraft. A British visitor to Israel could not fail to notice the ever-growing number of UK-manufactured cars in the Jewish state.

In terms of high tech, the rapid expansion of UK-Israel trade over the last decade has closely followed Israel’s emergence as one of the world’s leaders in high tech. Israel is now home to the highest density of start-ups anywhere in the world. That impressed me, because I thought India was. Clearly, Israel is more dense in that respect. It deservedly earns its title as the start-up nation. It is also home to the world’s major technology powerhouses, including Google, Microsoft, Intel and Motorola. I have had the privilege of visiting Israel on a number of occasions with the Conservative Friends of Israel, and the dynamism and forward-thinking nature of its high-tech sector and young entrepreneurs is palpable. I particularly remember visiting an early electrical vehicle pioneer back in 2011. Remember 2011? That was 11 years ago. As is often the case, the Israeli company was many years ahead of the market. The only thing holding it back was battery technology at the time.

Israel has achieved this success with intellectual power in the face of geographic and geo-political disadvantages, conflict and a lack of natural resources. Another reason behind Israel’s success story is that the country is an investor in research and development, spending as much as 4.9% of its GDP on R&D in 2018. That is more than double that of the UK—something else we should think about. It offers us very serious food for thought.

Increasing trade with Israel has been a long-standing UK objective. The UK-Israel tech hub, which was established at the British embassy in 2011, was the first of its kind to promote partnerships in technology and innovation between the UK and Israel. It has successfully generated hundreds of tech partnerships between the UK and Israel and is so far worth more than £85 million. It has led to the additional tech hubs in India, Indonesia, Kenya, South Africa, Nigeria, Brazil and soon Romania.

Brexit has presented us with an exciting opportunity to negotiate a bespoke UK-Israel free trade agreement. Our two nations are closer than ever and share the same values and outlook on international trade. There are endless possibilities for the UK and Israel to work together to become the world’s leading tech centres. I encourage my hon. Friend the Minister to be ambitious in the forthcoming negotiations. The trade continuity agreement, which was signed in February 2019, ensured the continuation of the trade terms covered by the EU-Israel association agreement. That should be the bare minimum we seek to negotiate in the new UK-Israel trade deal.

The International Trade Secretary said last month that her Department would be opening a public consultation on this important free trade agreement this January. We do not have long to go, so I am looking to the Minister, and I do not want to hear “soon” as an answer. Given the importance of the UK-Israel bilateral deal, I wonder whether the Minister can shed some light on the commencement date. I very much hope that the starting gun will be fired in the forthcoming days.

I know many colleagues in this place are looking forward to the UK hosting a joint innovation summit with Israel in March this year, but I wonder whether the Secretary of State has any plans to visit Israel in the near future to see for herself the many trade opportunities emerging from this tech powerhouse. I trust that she will visit and that that can kick off the negotiations properly.

My hon. Friend the Minister has spoken of the UK’s desire to expand opportunities in financial services, infrastructure and technology. Can he provide an update on the progress of these sector-specific ambitions?

The UK and Israel can boast the world’s two most successful covid-19 vaccination programmes, which is a source of great personal pride to both countries. Our beloved NHS has delivered a vaccination programme at a speed and scale that is truly the envy of the world. Israel’s digitalised healthcare system played an instrumental role in that success. The Department for International Trade has previously expressed the desire to seek a trade deal with a chapter focused on advanced digital data and technology, including med-tech. Can my hon. Friend the Minister assure me that that remains the plan? What discussions has he had with his counterpart in Israel on the subject?

Israel’s success in R&D is commendable. Will the Minister consider using free trade negotiations to explore a binational research and development programme to the mutual benefit of both countries? Israel has such a programme in place with the United States, known as BIRD—Israel-US Binational Industrial Research and Development—and cumulative sales of products co-developed by Israeli and American companies through BIRD have exceeded $10 billion. Given the immediate strategic challenge posed by disruptive actors on the international stage, it is more important than ever that we work with trusted allies to produce the technologies of the future.

As we move to deliver on our net zero commitments, I call on my hon. Friend the Minister to work closely with Israel. The country has been known as the superpower of sustainability. While we will not be able to recreate here the solar tower that harnesses Negev sunshine to generate electricity, we can certainly learn much from Israel’s world-leading water reuse programme to avoid future droughts. The UK and Israel boast sector-leading green-tech and agri-tech start-ups, and there are many opportunities to expand on that.

With this ambition in mind, I call on the Minister to seize the opportunity of the historic Abraham accords, which have ushered in a ground-breaking new chapter for peace in the middle east, between Israel and her neighbours in Bahrain and the United Arab Emirates. While the accords have been in effect for less than two years, they have already had a seismic effect on the region in terms of trade and investment, which has rapidly expanded.

The breakthrough water-for-energy deal between Jordan and Israel, brokered by the UAE, demonstrates that the peace is far-reaching and gives us, tentatively, an opportunity for proper peace in the middle east. I hope the UK will actively consider the ways in which we can support these new links, and use our own strong relationships in the region to further build on the Abraham accords.

There are challenges. The Government have prioritised the relationship with Israel and have put in place frameworks to stimulate collaboration, but there is much more we can do to ensure that Israeli companies make the UK their natural first stop internationally to trial and scale their products.

I had the pleasure of releasing “A shot in the arm: Israel and UK healthtech innovation”, a report from the all-party Britain-Israel parliamentary group and UK Israel Business. The report identified several impediments that face Israeli health-tech companies seeking to enter the UK market. Many of the proposals would also work across different sectors. For example, the report recommends creating new UK-based landing pads to assist Israeli companies touching down in the United Kingdom, which should include advice on how best to position their value proposition and achieve adoption at pace and scale in the UK.

Another challenge facing Israeli start-ups is the constraints imposed by short-term visas. We contend that as part of the Israel-UK landing pad, start-ups selected and incubated through the scheme should be automatically awarded a start-up visa as part of the scheme. A visa awarded to landing pad companies would be time-bound by the landing pad programme horizon—a scheme that already takes into account other critical factors such as capital requirements, pilot testing and scale horizons. Will the Minister take the time to read the report, consider its recommendations and, I hope, act upon them?

While there is much to celebrate in our burgeoning trade relationship with Israel, it would be remiss of me not to quickly touch on the so-called Boycott, Divestment and Sanctions movement—or BDS, as it is more commonly known. Simply put, BDS is a harmful, politically-motivated campaign that seeks to delegitimise Israel. BDS does nothing to advance the Palestinian cause; in actuality, it is anti-peace. I applaud the Government for their rejection of BDS and their clear commitment to ever-greater trade with Israel.

The fact that many of those targeting Israel with economic boycotts also actively seek to extend their harmful boycotts to those in the cultural and educational spheres says everything we need to know. It is unthinkable to me that anyone could seek to minimise collaboration between UK and Israeli scientists tackling some of the greatest health challenges facing our societies, such as Alzheimer’s, covid-19 and Parkinson’s disease.

It is deeply regrettable that Ben & Jerry’s—the ice cream makers owned by British company Unilever—has engaged in its own recent boycott of Israel; the controversial move rightly provoked strong condemnation. I call on Unilever to challenge such harmful measures.

The Government’s forthcoming legislation to stop public bodies across the UK discriminating on grounds of country and territory of origin must feature provisions to prevent procurement policy being used as a tool of foreign policy or an attempt to regulate international trade. Legislating on this important manifesto commitment will be warmly welcomed by many of my constituents, and I call on the Minister to work closely with colleagues in the Department for Levelling Up, Housing and Communities to counter discriminatory policies that are harmful not only to community cohesion here in the UK but to the UK’s trade interests and foreign policy goals. I commend the UK Government’s response to BDS, which has been to seek ever-closer economic relations with Israel. Now is the time to go one step further and ensure that the principles of fairness and non-discrimination are enshrined at the heart of the UK’s public procurement regime.

Having experienced a decade of record-breaking growth in trade, the United Kingdom and Israel are natural partners across a wide range of innovative fields—from financial to agricultural technology, spanning government, the private sector and higher education. We therefore have before us an invaluable opportunity to reshape our trading relationship for the future. The UK-Israel trade deal is much anticipated for its many important economic benefits, but it also presents an opportunity for the UK to expand its ever-tightening relationship with a close ally. Given Israel’s status as a world-leading tech power, it is important for the UK to make the most of the many advantages of the trade deal by taking an ambitious approach to trade negotiations.

Done right, this deal could serve as a model for UK partnerships with other advanced, innovation-intensive states, including South Korea, Singapore and Taiwan. My colleagues and I stand ready to support work on an enhanced trade agreement. I hope that the Minister can assure me and my hon. Friends that the call for input is about to begin, and that we can look forward to an excellent free trade deal with our friends in Israel.

[Jim Shannon (Strangford) (DUP)]

It is always a pleasure to serve under your chairmanship, Mr Paisley, and to be in your company—I want to have that on the record. We are close friends and colleagues, having come into this House at the same time.

I congratulate the hon. Member for Harrow East (Bob Blackman) on setting the scene. We missed him this morning at International Trade questions. I figured if he was not there, something must be seriously wrong, but he was there later on—he was alright. His question was still asked—I do not know how he did that. He is always very helpful to me when I go to the Backbench Business Committee to ask for a debate. I am not aware of any occasions—touch wood—when I have been refused a debate by the Backbench Business Committee, and the debates have always been on topical issues, so it is good to have them. Today’s issue is very close to my heart, and the hon. Gentleman outlined it incredibly well.

I see that the hon. Member for Hendon (Dr Offord) has a debate scheduled for Westminster Hall under a slightly different topic heading; we will probably repeat the points that we have addressed today. If God spares me until then, I will be here at 9.30 on Wednesday morning to support the hon. Gentleman in the debate, as will others.

The hon. Member for Harrow East often raises the importance of securing a trade deal with Israel, and I agree. In 2017, Israel was voted the fifth most innovative country in terms of technology and cyber-security. There is absolutely no doubt that we need to increase our co-operation, business and economic growth alongside Israel, so that both countries can benefit. It is imperative that we continue to improve trade relations with our friends and partners.

When I was at the Northern Ireland Assembly—I was there for 12 years—I was a member of the Northern Ireland Friends of Israel group. When I came here, I continued that relationship with the Friends of Israel. I am keen to see relations between the United Kingdom and Israel continuing and, indeed, increasing. The hon. Member for Harrow East said that, too. We should appreciate that that is for everyone’s benefit. Figures from the year 2017 show that UK exports to Israel were £2.3 billion, making it the UK’s 42nd largest export market—accounting for 0.4% of all UK exports. UK imports from Israel were £1.6 billion, making it the UK’s 47th largest import source, accounting for 0.3% of all UK imports. Most recent figures from 2020 also show that the UK had bilateral trade with Israel amounting to £5.1 billion. It is clear that we have a good relationship, but we always want to do better; that is the reason for this debate. It is what the hon. Member for Harrow East is looking for.

There is certainly evidence that there is a need for progressive trade relations with Israel in regards to security—that is an important factor for us all and a key one for me. The Foreign Secretary stated back in November, along with her Israeli Counterpart, that,

“there is a need for a new strategic plan for the next decade, spanning cyber, tech, trade and defence.”

The opportunities are enormous. It was also mentioned that the two countries would work night and day, 24/7, to prevent the Iranian regime from ever becoming a nuclear power. That would be to the benefit of everyone, and to the benefit of world peace, not just the UK and Israel. That is brilliant and we should all try and achieve that. Even the couple of Members here who do not have active participation with Israel should want to make sure the Iran does not achieve nuclear power.

It was former Secretary of State William Hague who labelled science and business ties

“one of the cornerstones of the relationship between Israel and the UK.”

The strategic agreement signed with Israel is the starting post for a series of activities that will deepen our trading relationship. I understand a public consultation on our enhanced bilateral free trade agreement will be opened this month, and there will be further trade strategies in March, as the hon. Member for Harrow East said. It is crucial that we do all we can now to progress this trading relationship. It is important to remember that our trade connections help to strengthen our relationships not only with Israel, but with the rest of the world. It is only right that trade connections benefit every one of us, and Israel is a key friend and trading relationship.

The Minister says that there will be a joint innovation strategy. With that in mind, will there be discussions with Education Ministers? There is the possibility that we can do things in that area, such as combining specialised research through our universities. We have been very good at that with other countries, so maybe the Minister could tell us what could be done in relation to that with Israel.

Israel has proven successful through some of the world’s leading companies, such as Teva Pharmaceuticals, which is worth over £57 million, and computer specialist Intel, which is worth over £27 million. Combined, both of those companies employ over 53,000 people. In addition, UK exports to Israel amounted to £2.6 billion in the four quarters to the end of 2021, which represents a slight decrease—I find that hard to comprehend, but it was probably due to the pandemic and other factors. Could the Minister give us an explanation of why there was a small decrease? Total UK imports from Israel amounted to £9.1 billion at the end of 2020, which was also a decrease of 10.8% from 2021. Again, was the pandemic the reason for that? If it was, then we know that those numbers can only go one way, which is upwards. We must do all we can to ensure that those figures do not decrease any further. I am sure the Minister will respond to that point.

Israel was the UK’s 40th largest trading partner at the end of 2020. I encourage the Foreign, Commonwealth and Development Office to do all it can to ensure that we continue to show interest through trade. I understand that trading figures may have decreased due to the covid-19 pandemic, but it is essential that we do not continue to let this become a problem. Our economy is essential to our success, for jobs and for the benefit of all of us in the UK, Israel and, of course, the world.

I understand that other Members want to speak, so I will conclude my remarks. It is crucial that we prioritise our trading links with other countries. More discussion must take place between the Minister and his counterparts to expand our products’ scope, and how we can build on what we have and perhaps even develop it more. When it comes to trade deals, our Government have been very successful so far, so we look to see where we are with Israel. We all welcome the prospect of an enhanced trade deal with Israel, as well as strong support from UK Export Finance to help finance exports into Israel. With that in mind, I very much support what the hon. Member for Harrow East has said, and look forward to the Minister’s response. It is good to see him in his place: he has been missing for a while, but wherever he has been, it is good to see him back.

[Ian Paisley (in the Chair)]

The Minister will be able to explain those sleepless nights very soon.

--- Later in debate ---

[Mr Jayawardena]

I am delighted to have that contribution on the record. Just as we stand clearly against boycotts and support the Abraham accords, the United Kingdom’s position on the settlements is clear. Settlements are illegal under international law, damaging to peace efforts, and call into question, I am sorry to say, Israel’s commitment to the two-state solution. We have urged Israel to halt its settlement expansion, which threatens the physical viability of a Palestinian state. Britain’s view is that the settlements in the Occupied Palestinian Territories are illegal under international law, so they are not covered within the scope of our trade agreement. This means that goods imported from illegal settlements are not entitled to the benefits from trade preferences, and we remain committed to that approach. This shows that more trade need not come at the expense of our values.

The hon. Member for Airdrie and Shotts raised the matter of arms exports to Israel. Her Majesty’s Government take their arms export responsibilities very seriously. We do not want any British equipment to be misused, and we aim to operate one of the most robust arms export control regimes in the world, complying with all our international obligations. We consider all export licence applications thoroughly against a strict risk assessment framework, and keep all licences under careful and continual review as standard.

The Government will not grant an export licence if to do so would be inconsistent with the strategic export licensing criteria. Those criteria provide a thorough risk assessment framework for assessing export licence applications, and require us to think hard about the impact of providing equipment and its capabilities. These are not decisions we take lightly. We continue to monitor the situation in Israel and the Occupied Palestinian Territories closely and keep relevant licences under review. If necessary, we will take action to suspend, refuse or revoke licences in line with the criteria, but only if circumstances require.

The economic relationship between Israel and the United Kingdom is strong, based on the trade and partnership agreement that allows British and Israeli businesses, exporters and consumers to buy and sell freely and with confidence. Israel is a friend and ally in the middle east, with an innovative and dynamic economy. Tech, science and innovation co-operation between businesses of both countries continues to grow, with real benefits for consumers across our United Kingdom. Through an ambitious, forward-looking and comprehensive free trade agreement, founded on the strength of the Israeli and British economies, we look forward to developing and improving that relationship even further in the future as an independent trading nation.

[Ian Paisley (in the Chair)]

Mr Blackman, you have some time for your winding-up speech. You do not need to take it all.