After the Pandemic, Israel Must Reduce Its Economic Reliance on China

March 23, 2020 | Jacob Nagel and Jonathan Schanzer
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Given the rapid spread of coronavirus from China to the rest of the globe, and Beijing’s suppression of information about the disease, the U.S. and other nations have begun to rethink the extent to which their economies are entangled with China’s. Israel, which has already responded to Washington’s concerns about its exchanges of technology with China, should lead the way, argue Jacob Nagel and Jonathan Schanzer:

China accounts for roughly 10 to 15 percent of the Israeli economy. Israel relies on China for a wide array of imports. This includes raw materials and food, but also elements of Israel’s automobile, pharmaceutical, construction, and national-infrastructure sectors, to name a few. Chinese components abound in Israeli toys, furniture, jewelry, and more.

There are existing or impending shortages in the aforementioned sectors in Israel. Diversifying trade partners in the Far East and beyond is the only way to ensure this doesn’t happen again. And in doing so, Israel can also assuage its American allies that it is cooling its ties with China. . . . [T]echnological advancements in recent years have blurred the boundaries between defense systems or supervised dual-use systems, [i.e., those that call for special scrutiny because they can be used for civilian or military purposes], and systems with no clear connection to defense. As a result, Israel risks contributing to Chinese technological advances in defense without intending to do so.

As Israel considers reductions in its exposure to China, there will be economists and policymakers who argue that Israel desperately needs Chinese investment and that it cannot be replaced by other countries. They will likely be proven wrong. Israeli tech is coveted by Japan, South Korea, Brazil, India, and European states, to name a few. When the coronavirus crisis has passed, Israel must view them as possible alternatives to Chinese investments and supply chains.

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