Executive Summary

Next to its younger cousins, the U.S.-Israel Free Trade Agreement looks simplified -- something like the SparkNotes version of a novel. But in the 25 years since its signature in 1985, it has sped the transformation of an economic alliance, from a relationship defined by aid and tourism into a partnership among advanced economies founded on trade, investment, research, and regional integration. A generation after its launch, though, the agreement is showing its age.

Most of its tariff content is outdated, overtaken in the mid-1990s by rules set globally through the World Trade Organization. Meanwhile, it does not address the sophisticated issues -- e-commerce, services trade, standards-setting, intellectual property -- central to modern relationships among advanced economies. Thus its relevance to the U.S.-Israeli alliance is fading. As it approaches its 25th anniversary next August, the American and Israeli governments should revitalize it with supplemental agreements to cover high-tech issues and broaden its role in regional economic integration.

Edward Gresser is president of the DLC and director of the DLC's Trade & Global Markets Project.