A SOPHISTICATED RELATIONSHIP \ '85 PACT FELLED BARRIERS, SPURRED COMMERCE, ESPECIALLY TECHNOLOGY

A SOPHISTICATED RELATIONSHIP \ '85 PACT FELLED BARRIERS, SPURRED COMMERCE, ESPECIALLY TECHNOLOGY

When U.S. and Israeli businessmen meet in Washington and Santa Clara, Calif., next month for two technology conferences, they will be visible proof of the sophisticated new trade relations between the two countries.

Some 75 to 80 Israeli companies will participate in an exhibition called Invest Tech May 11-13 in Washington. Then on May 27-28, more than 100 Israeli firms will present their products and services to an audience of financiers and potential strategic partners at Tech Ventures: Santa Clara at the Santa Clara Convention Center. The conference and an accompanying exhibition are designed to unite U.S. investment and marketing professionals with Israeli high-tech business leaders.

The event reflects the two factors that dominate trade between Israel and the United States: free trade and technology.

Reduction of trade and investment barriers has spurred new commerce between the two countries. Since they signed a free-trade agreement in 1985 - the first such deal for Washington - bilateral trade has soared from $4 billion to $13 billion last year.

The principal U.S. imports from Israel are diamonds, machinery, electronic goods, optics, medical supplies, plastics and textiles. The main U.S. exports to Israel are medical equipment, military hardware and telecommunications equipment.

The growth of high-tech trade has been a two-way street. Major American players include Microsoft, Intel and America Online. Most of the Israeli companies are smaller firms whose real capital is the brainpower of their employees.

''Because it's such a small country, they're in an export mode all the time,'' said Alan Weinkrantz, president of Alan Weinkrantz and Co., a San Antonio, Texas-based public relations firm, specializing in serving Israeli high-tech companies.

But, he adds, there can be communications problems. ''There is sometimes a culture clash. It's a challenge to form a link between the Israeli high-tech company and U.S. importers and marketers. The trick is to get them (the Israelis) to understand the marketing side of the business.''

High-tech goods and services were the fastest-growing sector of bilateral trade last year, worth an estimated $2 billion. Venture capital flows and joint venture investments between U.S. and Israeli high-tech firms totaled another $1.5 billion.

''Five years from now, it will be very hard to distinguish between Silicon Valley and some parts of Israel,'' said Phil Rosen, head of the Israel practice at the New York-based law firm, Weil, Gotshal & Manges. ''It's a direct result of the free-trade agreement.''

Commercial relations between the two countries are not without friction. Israeli trade officials cite problems with U.S. labeling and weights and measures regulations (the latter often generated because Israel tends to use the metric system), and with some agricultural product restrictions.

U.S. officials cite several copyright problem areas, particularly for software, videos, compact discs and pharmaceuticals. ''It's a problem of enforcement,'' said Paul Thanos, a Commerce Department trade specialist in the Office of the Near East.

In 1997, the United States made its concerns known by placing Israel on its ''301'' watch list, which serves as a warning to countries to properly enforce intellectual property rights laws.

However, trade officials in both countries say the disputes will not seriously hamper bilateral commerce and investment. ''I'm optimistic for an expanding trade relationship,'' Mr. Thanos said. ''It's almost a given.''

The U.S. Commerce Department plans to take a trade mission to Israel, the West Bank and Gaza, Egypt and Jordan June 5-12. Commerce Department officials say it will focus on high-tech trade and investment.Israeli desire to expand trade with the United States is relatively easy to understand, said Nikolas G. Kapatos, vice president in the New York office of Bank Hapaolim B.M., a leading Israeli bank. ''The U.S. economy is so strong, everyone wants a piece of the action.''