Israel signed a free trade agreement with the United Arab Emirates on Tuesday, its first big trade accord with an Arab state that reduces or removes tariffs and over time targets lifting annual bilateral trade to more than $10 billion.
The pact was signed in Dubai by Israel's Minister of Economy and Industry Orna Barbivai and her counterpart, UAE Minister of Economy Abdulla bin Touq Al Marri, after months of negotiations.
Tariffs will be eliminated on 96% of goods with the UAE predicting the Comprehensive Economic Partnership Agreement would boost bilateral trade to more than $10 billion a year within five years.
Emirati trade minister Thani Al Zeyoudi said the trade deal wrote "a new chapter in the history of the Middle East."
"Our agreement will accelerate growth, create jobs and lead to a new era of peace, stability, and prosperity across the region," he wrote on Twitter.
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The agreement has been signed amid escalating Israeli-Palestinian violence.
The UAE foreign ministry on Monday condemned what it called a "storming" of Al Aqsa compound in Jerusalem by "extremist settlers under the protection of Israeli forces."
That appeared to refer to visits by thousands of Jews, who revere the site as vestige of their two ancient temples, on the day marking Israel's capture of Jerusalem's Old City in a 1967 war. Some of the visitors prayed and held up Israeli flags - resulting, police said, in their removal.
Al Aqsa, also the third holiest site in Islam, is situated in East Jerusalem's Old City that Israel has annexed but is not recognised internationally.
The foreign ministry, in the written statement, also asked "Israeli authorities to take responsibility for reducing escalation and ending all attacks and practices that lead to the continuation of tensions while underscoring the need to exercise maximum restraint to avoid further instability."
The same day invited media were told they could no longer attend the signing of the trade deal. No reason was given for the sudden change.
Israel's Barbivai told Israeli radio on Tuesday she had heard "nothing out of the ordinary" about the Al Aqsa violence so far during her visit to the UAE.
President of the UAE-Israel Business Council Dorian Barak said the trade agreement defined tax rates, imports and intellectual property, which would encourage more Israeli companies to set up offices in the UAE, particularly in Dubai.
The council predicts there will be almost 1,000 Israeli companies working in or through the UAE by the end of the year doing business with South Asia, the Far East and Middle East.
"The domestic market doesn't represent the entirety of the opportunity. The opportunity is really setting up in Dubai, as many companies have, in order to target the broader region," Barak told Reuters by phone.
Emirati-Israeli trade reached $1.2 billion in 2021, according to official Israeli data.
Ahead of the signing, Israel's economy ministry had said the accord would remove tariffs on food, agriculture, cosmetics, medical equipment and medicine.
"Together we will remove barriers and promote comprehensive trade and new technologies, which will form a solid foundation for our common path, will contribute to the well-being of citizens and make it easier to do business," Israel's Barbivai said on Monday.
For oil-rich UAE, the deal with Israel is its second bilateral free trade agreement after signing a similar accord with India in February. It is in bilateral trade talks with several other countries, including Indonesia and South Korea.
The UAE has been aggressively pursuing these deals in a bid to strengthen its economy and status as a major business hub following the hit it took from the coronavirus pandemic.
Israel and the UAE established ties in September 2020 in a U.S. brokered deal that broke with decades of Arab policy that had called for a Palestinian state before ties with Israel.
Bahrain and Morocco also recognised Israel in the same year.