Ambassador Daniel Shapiro
Address to the 2016 Ministry of Finance Budget Division Annual Conference in Memory of those Lost in the Yom Kippur War
Theme: Shared Efforts on Shared Economic Challenges
Convention Center, Jerusalem
November 8, 2016
Good afternoon. If you were living on the planet Saturn, you may not know that the United States has an election today. An important election, after a long campaign. So, my first message is “Thank you” – “Toda” – for the honor of joining you on an occasion where I can speak about economics – not the election. You have no idea how grateful I am!
I’d like to acknowledge Amir Levy, head of the Budget Department who is a great friend to the Embassy, and the entire conference team that is responsible for putting on one of Israel’s most impressive gatherings.
We count you in the Finance Ministry and specifically the Budget Department as our partners and as some of my Embassy’s closest contacts, so it’s an honor for me to be invited to speak to you today.
I also want to take a moment to acknowledge those members of the Budget Department memorialized by this conference, who were killed in the service of their country during the Yom Kippur War — a war that claimed almost 3,000 Israeli lives. We remember them all now and forever.
In fact, my first experience in Israel was as a young boy here during the Yom Kippur War in 1973, when my family was here on sabbatical. That experience formed the foundation of my family’s connection to Israel.
Transition to Speech
Common security interests and common values are at the heart of the deep and abiding U.S.-Israel alliance, including our robust support for Israel’s missile defense programs and our new ten-year memorandum of understanding on $38 billion in military assistance that will cement our unparalleled security relationship well into the next decade.
But in recent years our extraordinary alliance has expanded beyond the security and values spheres to become an alliance of common prosperity. I want to devote the bulk of my remarks to this tremendously important development, which we frankly don’t spend enough time talking about.
First, I will offer a few words about how our two innovation-based economies have become increasingly interconnected.
Second, I will discuss how we are working together to solve some of the central economic challenges of the 21st century, first looking at Israeli economic challenges, then at global economic challenges.
Third, I will describe how we have intensified our government-to-government cooperation and have begun to better align and upgrade our economic policies. Good policy remains a key accelerator and an essential requirement for future economic growth.
Interconnected Innovation-based Economies
“Americans admire a people,” said President Nixon, “who can scratch a desert and produce a garden.”
That admiration was on full display during President Obama’s visit in 2013. “If people want to see the future of the world economy,” he said, “they should look at Tel Aviv, home to hundreds of start-ups and research centers.” Innovation, the president said, is now “just as important to the relationship between the United States and Israel as our security cooperation.”
Our economic and commercial relationship now spans IT, bio-tech, life sciences, health care solutions, energy, pharmaceuticals, food and beverage, defense industries, cybersecurity, and aviation, to name just a few sectors.
It should come as no surprise that our two innovation economies have so many synergies. The strong spirit of entrepreneurship and innovation that flourishes in both our countries simply makes U.S. and Israeli companies—and their respective economic eco-systems—an excellent match.
The innovation and creativity that pour forth from the engineers of the Start-Up Nation have drawn American technology companies here in huge numbers. American companies account for two-thirds of the approximately 300 international R&D centers in Israel. One of the first, Microsoft, just celebrated its 25th anniversary in Israel.
I had the opportunity to attend the demo fair that Microsoft put on in honor of this occasion – where I tried out some really neat technology – like from a company called WeissBeerger, which uses big data to optimize beer consumption! Or Tikkun Olam Makers which connects people with disabilities to innovators who can create solutions to their everyday challenges.
Several prominent U.S. corporations, including Cisco, GE, and Intel, established accelerators in Israel in 2015. The leaders of these companies understand that to stay globally competitive they must develop new ideas and businesses. Israel is a great place to do that.
Critical components of leading American high-tech products are invented and designed in Israel, making these American companies more competitive and more profitable globally.
For Israeli start-ups looking to scale-up, connecting with America is a natural step given our size, our global connections, and our world-class intellectual property laws. We grant thousands of patents a year to Israelis. There are more Israeli companies listed on the NASDAQ exchange than Indian, Japanese, and Korean listings combined.
Meanwhile, in the energy sector, one American company—Noble Energy—is helping Israel become energy secure by developing its offshore natural gas resources, which will supply both the Israeli domestic and regional export markets.
All of this cooperation and collaboration translates into jobs in both countries. Two-way job creation and joint product development touch the lives of millions of Americans and Israelis either directly or indirectly.
Israel is home to over 2,500 U.S. firms employing some 72,000 Israelis, according to an estimate by the U.S. Chamber of Commerce. Thousands more jobs are supported indirectly by these employers. The New England-Israel Business Council just released a study that shows that Israeli-founded businesses have generated about 9,000 jobs in Massachusetts alone, and indirectly support an additional 18,000. These companies represent nearly four percent of the state’s GDP. And that is just one state. The Governor of Massachusetts will be here next month with a large delegation and we will work together to make those extraordinary numbers even higher.
And with El Al’s non-stop service to Boston and United Airlines’ new daily non-stop service to San Francisco, our innovation economies will be even more tightly connected.
In the spring, I traveled to the Bay Area on one of the first of those United flights with dozens of Israeli high-tech executives and entrepreneurs as part of a delegation organized by the Israeli business newspaper, Calcalist. I experienced up-close how innovation is driving our common prosperity.
The delegation made quite a buzz in Silicon Valley. Major companies including Google, WeWork, and GoPro opened their doors to us, eager to connect with Israeli entrepreneurs. And Israeli participants took back lessons from U.S. industry and investors, including the latest trends in social entrepreneurship, which I expect will be a more prominent feature of the next wave of Israeli innovation.
Addressing Economic Challenges – part 1
Israel and the U.S. are intertwined in our economic prosperity, but we also share some significant economic challenges. Both of our nations are, unfortunately, at the wrong end of the OECD scale when it comes to income inequality.
At home, President Obama, in his final State of the Union address said that for the past seven years, his most fundamental goal has been to foster a growing economy that also works better for every American. He has called the combination of growing income inequality and a lack of upward mobility as “the defining challenge of our time.”
Israeli leaders, partly in response to President Rivlin’s call for a common future for all Israeli citizens, are also increasingly focused on the imperative of economic inclusion. President Rivlin clearly understands the importance of spreading economic benefits and opportunities to all segments of Israeli society.
The Ministry of Finance’s Budget Department has been at the leading edge of this challenge in Israel, working tirelessly to close the gaps in Israeli society between those who are reaping the benefits of a modern economy and those who have been left behind.
You deserve praise for having the courage to push forward a new five-year economic development plan to address the gaps between Israel’s Arab and Jewish citizens and for the work you’ve done to provide economic opportunities for ultra-orthodox families. We look forward to seeing the fruits of these efforts.
At the U.S. Embassy, we have also made supporting such efforts a priority of our work in Israel. Through our Middle East Partnership Initiative we have teamed up with partners like Tsofen, Kamatech, She Codes, and the MIT Enterprise Forum, and other local initiatives to promote entrepreneurship and economic development in the periphery and among minorities
Through these programs, we are trying to close gaps by supporting wider access to advanced English studies and science and technology education, and by helping accelerate businesses among the Arab, Haredi, and Ethiopian communities.
Addressing Economic Challenges – part 2
The second aspect of the U.S.-Israel economic success story is that we are engaged in joint efforts to respond to critical 21st century global economic challenges. Addressing these global challenges can generate public good as well as prosperity.
For example, as the world economy becomes increasingly digitized, and as the risk from cyber-crime and security breaches grows exponentially across nearly every industry, our two countries have become world leaders in developing cyber-security solutions.
Not too long ago, I hopped on the train from Tel Aviv to Beersheva – less than an hour’s ride – and saw how American and Israeli companies are working side-by-side at CyberSpark. It is a fast-growing, world-class, hi-tech office park, adjacent to a top academic institution, Ben-Gurion University of the Negev, and not far from where critical public-sector institutions, like the IDF’s cyber and intelligence units, will soon be located. This unique eco-system is rapidly attracting more American companies to take part in developing the defenses that will protect the new economy.
Water is another area where we are increasingly working together. After addressing their own century-long water crisis via breakthrough technologies in desalination, recycling, conservation, management and irrigation, Israelis are now working more closely than ever before with Americans—especially in the Southwestern United States—to help us tackle our huge water challenges.
The new reverse osmosis desalination plant in Carlsbad, California, designed by IDE, an Israeli company, is one of the largest and most technologically advanced in that region.
When I visited IDE’s Sorek desalination plant a few weeks ago, the largest of its kind in the world, it was inspiring to learn how far Israel has come and how keen Israelis are to move deeper into the American market.
In terms of clean energy and addressing the challenge of climate change, Israel has the potential to be a world leader. In his speech at the U.N. Climate Change conference in Paris, Prime Minister Netanyahu spoke about Israel’s technological prowess in areas such as solar and other renewables, and energy efficiency. He is right. Israel, on the verge of ratifying the Paris Agreement, has the chance not only to deploy those new technologies here at home, but also to hasten the global clean tech revolution.
Synchronizing Government Policies
So our private sectors have led the way in building our economic partnership. The continued pursuit of our common prosperity will also depend on our ability to modernize and upgrade the economic policy frameworks that are so critical to continued growth and innovation.
Path-breaking scientific venture funds like BIRD, a historic Free Trade Agreement in the mid-1980s, American energy guarantees, and also our generous loan guarantees and economic assistance helped set the stage for the launch of Start-Up Nation, but these structures must adapt and adjust for the future.
In 1985, Israel’s economy was facing multiple challenges: high inflation, large government budget deficits, and slow growth. The decision by our two governments to create the U.S.-Israel Joint Economic Development Group—the “JEDG,” as we call it—was critical for the economic stabilization plan that it produced, successfully reinvigorating the Israeli economy and putting it on a path toward rapid growth in the 1990s and beyond.
The JEDG still exists and last convened in Israel in May, organized by the Embassy’s economic officers and the Finance Ministry. It is no longer just a forum for government economists to review macroeconomic trends and the U.S. loan guarantee program. Rather, it continues to evolve and now enables our top economic policy makers across multiple agencies to address new areas for joint work, including clean energy, health innovation, and science and technology cooperation.
In our most recent trade discussions, we examined ways to increase commerce between our nations – we can be proud that we have hit an all-time high of $49 billion in two-way trade. But we can do more to break down barriers to trade and address cost of living challenges.
When you look around the world at large or small markets, the ones that have the greatest choice and lowest prices are invariably those that have opened their markets to full and free trade. They also tend to be the countries that are most competitive in exports.
Free market competition helps hone domestic industries, making them more responsive to emerging global consumer trends.
Many tariffs, quotas, and non-tariff barriers still exist that prevent Israeli consumers from being able to enjoy a diverse range of products — and at prices that make sense.
Both of our countries have so much more to offer each of our markets. Whenever I go back home to Chicago, my daughters and I crave Bamba and Israeli cherry tomatoes.
And when I am here in Israel, there are American food items that my family and I miss, such as concord grapes from New York. My friend Senator Chuck Schumer – who is also a great friend of Israel – says opening the Israeli market to more American grape juice would benefit New York concord grape farmers and lower prices for Israeli consumers.
In one significant example of progress on trade – I can now answer the question “where’s the beef?” Well, for brisket, cholent and steak lovers, I am pleased to announce that an agreement was recently reached to renew American beef exports to Israel for the first time in over a decade.
The first shipment, arrived this past June from the great state of Nebraska, and was served at the Embassy’s Fourth of July reception. Just this week, the first commercial shipment will arrive at Ben Gurion Airport, and this high-quality, delicious, kosher U.S. beef will make its way to Israeli consumers.
I want to see more of these American products available in Israeli supermarkets at the cheaper prices the rest of the world pays. This would stimulate competition and offer Israeli consumers more choices and lower prices. Struggling Israeli families should not have to pay twice the price for the same product that an American or European family pays.
Bottom line, I think that when it comes to addressing the challenges to the cost of living, our countries can do more to reduce trade barriers.
In addition to modernizing our trade frameworks, there is more we can do to encourage and facilitate business investment in the United States. Israel is a top-20 investor in the United States. Israelis now invest close to $24 billion in the United States, nearly triple what it was a decade ago.
Earlier this year, I led the largest ever delegation of Israeli companies to the Department of Commerce’s SelectUSA Investment Summit in Washington. Representatives from all fifty states, as well as dynamic economic regions within states, were there, recruiting foreign companies who want to establish or expand their presence in the U.S.
The American market is increasingly attractive to Israeli companies in many diverse sectors, and it remains our job to ensure that barriers to entry are eased and potential investors here get the help they need.
Among other initiatives, our governments are working toward finalizing the establishment of an E-2 investor visa category, to enable investors to stay long enough to establish and run their businesses.
A non-stop flow of high-level U.S. government visits to Israel has ensured that our economic alliance remains high on the agenda. During Energy Secretary Moniz’s visit, we signed an expansive agreement with Israel to increase cooperation on fuel substitutes, smart grid technologies, and cyber protection of energy infrastructure.
Transportation Secretary Foxx examined collision avoidance and smart city technologies that can help Americans travel more safely and efficiently. He was also here to celebrate El Al’s decision to maintain its all-Boeing fleet by purchasing 787 Dreamliners as well as shared efforts by our countries to transition to cleaner, more climate-friendly modes of transportation.
Many Defense Department and defense industry representatives take pride in the contributions of local firms like Israel Aerospace Industries and Elbit to cutting edge projects like Lockheed Martin’s F-35 program, and Rafael’s partnerships with Raytheon and other American companies on missile defense technology. And the list goes on and on
Further integrating our innovation-based economies; resolving 21stcentury global challenges; and modernizing and upgrading our economic policies are critical to our mutual success in the future.
But as we look to increase our common prosperity, others want to isolate Israel. I am asked about BDS all the time, and understandably so, given Israelis anxiety about this pernicious campaign. I always emphasize President Obama’s and Vice President Biden’s staunch opposition.
President Obama said in February of this year, “I have directed my Administration to strongly oppose boycotts, divestment campaigns, and sanctions targeting the State of Israel. As long as I am President, we will continue to do so.” These are our marching orders, plain and simple, and we carry them out every day.
Individual states have also taken up this call – 12 have passed laws or executive orders directly against BDS or against any entity that tried to prevent trade based on national origin.
And on Election Day, this most partisan of days, let me highlight that most of these anti-BDS bills are passed with overwhelming bi-partisan support.
Beyond our opposition, I also remind Israelis that it is our counter-boycott–our unceasing effort to tighten economic relations–that is perhaps the most critical element of our response.
We believe the steps we take to reject and oppose efforts to boycott or delegitimize Israel have a deadening effect on attempts by others, including more recently debated boycott and divestment measures by non-profits and local groups.
It is true that there are voices in the United States, on college campuses and elsewhere, that are promoting the BDS campaign against Israel. They have that right. But no one should have any doubt that the policy of the U.S. government is to vigorously oppose and counter such initiatives.
And our actions speak even louder than our words. We are actively seeking to deepen our economic partnership with Israel. We encourage American companies to invest in Israel, and then celebrate their successes. We are recruiting Israeli businesses to invest in the United States. We do it because contributing to Israel’s economic success is the right thing to do, and it is in our interest, no matter what the critics say. And we don’t mind at all if it generates jobs and profits for Americans at the same time.
As someone who has stood on the Tamar off-shore platform, visited Google’s new ideas incubator in Israel, consulted with experts on how to protect our data at Beersheva’s CyberSpark, sipped water at the Sorek desalination plant, and met and traveled in the United States with countless Israeli innovators and investors, I can tell you that if today’s economic landscape seems impressive, my prediction is tomorrow’s will be nothing short of breathtaking.
In many ways, for all of our successes, I believe we have barely scratched the surface of what is possible.
My confidence also flows from my own country’s deep and enduring commitment to nurturing, promoting, and sustaining a more peaceful region. Whether it is de-escalation; supporting Palestinian state-building and economic development; or our decades-long support of Israeli-Egyptian and Israeli-Jordanian peace, America will never lessen its commitment to ending regional conflicts and building new, peaceful relationships.
Progress toward a two-state solution that ends the Israeli-Palestinian conflict would also help the fight against BDS and would further weaken those who advocate isolation. It has always been the case that one of our most effective tools to defeat boycotts and delegitimization is the presentation of a political process, negotiations, or some political horizon that gives hope for a two states for two peoples resolution to the Israeli-Palestinian conflict.
So it is certainly in our mutual interest to find the way back to direct negotiations with the Palestinians, and until then, to take steps to keep the two state solution viable for the future and avoid steps, such as settlement expansion, that seem to move the parties further away from, rather than closer toward, a two-state solution.
My confidence that we can further strengthen this alliance of prosperity also stems from Israelis’ legendary resilience.
In the south, despite the threat of missiles and tunnels, and in the north, despite decades-long security challenges from Lebanon, Israelis have done more than survive; they have thrived.
In the Western and Eastern Galilee in recent months, I met with college leaders, community representatives, innovators and social entrepreneurs. The visionary spirit, the determination, the ingenuity and the resilience – all of these were on full display.
Signs of economic dynamism were everywhere. Greater investment in higher education, community partnerships, and bringing to bear the benefits of our extraordinary alliance, these are all key inputs. And we want to be your partner in this work.
Let me conclude by restating the commitment of our governments to create a sense of common purpose in tackling global challenges and to create the conditions that have catapulted our economic ties to unprecedented levels.
And let me salute the Finance Ministry and the Budget Department and the thousands of innovators, entrepreneurs, investors, bankers, farmers, and traders who continue to seize those opportunities to sustain and strengthen our common prosperity.