Stock in Trade

Israel Tries to Convert Commercial Appeal into Diplomatic Capital

Benjamin Netanyahu with Li Keqiang, China's prime minister, in Beijing, May 2013. Kim Kyung-Hoon / Courtesy Reuters

For a country the size of New Jersey with a population smaller than Virginia’s, Israel has achieved spectacular progress in a once unlikely economic sector: science and technology. From a small cluster of industries once focused primarily on the military, this sector has blossomed into a vibrant international hub that shapes the country’s foreign partnerships.

Today, Israel’s homegrown Israeli IT companies rank among the fastest growing and most innovative in the world, and its high-tech weapons industry is among the top five gobal producers and exporters. The country is a leading destination for venture capitalists and private investors, among them Warren Buffett, who chose an Israeli firm for his first major overseas acquisition in 2006. Cisco Systems, IBM, Intel, Microsoft, and Nortel have all launched local state-of-the-art research and development centers. As Prime Minister Benjamin Netanyahu put it this past February, foreign business leaders “all want the same three things: Israeli technology, Israeli technology, and Israeli technology.”

These gains led many Israel’s policymakers to expect that its new commercial ties would influence diplomacy and help secure greater international support for some of the country’s contentious domestic policies. As just one example, Israel’s economics minister Naftali Bennett argued last year that “diplomacy can follow economy.” Trade, he said, would help Israel “deemphasize” the world’s preoccupation with the Palestinian issue.

But Israel’s high-tech dominance has also underscored the limits of using trade as a foreign policy tool. Israel has indeed been able to attract major new trade partners -- China and India -- and strengthen its foothold in some of the world’s fastest-growing markets. But the country’s expanding trade ties thus far haven’t won it greater international support for its policies toward Gaza and the West Bank and its priorities in the Middle East more generally. Israeli officials should recognize that the country’s economic successes can only marginally alter its tenuous diplomatic status quo.


Thanks to Israel’s

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