Israel and the European Free Trade Association are holding talks on a free- trade arrangement in hopes of signing an agreement by the end of this year - a full year before the unification of the European Community.
Bilateral trade between Israel and EFTA, as the association is called, was $2.3 billion in 1990.The first round of talks on an accord ended in failure when Israel introduced an overall import-liberalization program that went into effect Sept. 1.
The program reduced administrative barriers to imports from countries with which Israel had not signed a free-trade agreement, but at the same time raised customs duties.
EFTA negotiators had asked Israel to defer implementation of the program until a free-trade pact between EFTA and Israel was reached.
The Ministry of Industry and Trade is considering exempting EFTA countries, which include Austria, Iceland, Liechtenstein, Norway, Finland, Sweden and Switzerland, from the liberalization program and leaving the previous regulations in place until an agreement between the two sides is signed.
Until then, customs levies will be applied to EFTA products that until now have been subject only to quotas and other administrative restrictions.
While the liberalization program will allow more EFTA products to enter Israel, the new duties will make their products more expensive than comparable U.S. and EC products, which currently enter Israel duty free.
Yaacov Cohen, the Foreign Ministry's deputy director general for economic affairs, contends import duties below a certain level could be eliminated immediately.
Others could be be phased out over a period of years, said Mr. Cohen, who is also head of the Israeli delegation at the EFTA negotiations in Geneva.
Israel wants the agreement to include agricultural goods, which is not part of the Stockholm Agreement of EFTA. Despite the power of agricultural lobbies in Europe, Mr. Cohen believes Israel eventually will be able to work out an agreement with each individual country.
"We are working towards the economic integration into Europe from both angles," he said. "With the European Community and EFTA.
"We hope to achieve a unique status that will treat Israel almost like a European country in respect to the free movement of goods and services, government procurement contracts and movement of capital," he said.