Israel on a Tightrope over China

by Steve Kramer

Israel’s greatest ally is unquestionably the US. Under the leadership of Prime Minister Netanyahu, Israel has augmented its reliance on America and the West with an outreach to the East, primarily China, which has become its second-largest trading partner. The US sees Chinese inroads into Israel as a threat to itself. (See trade figures in Appendix)

A primary driver in Israel’s shift Eastward has been the growing animosity of the EU towards Israel, to the extreme of its boycotting goods produced in the heartland of Israel: Judea, Samaria, Golan Heights. Because the EU requires consensus for blanket decrees, Israel is at least spared those, due to a small group of E. European nations which generally do not give consent. The EU is still malicious enough for Israel to seek new trading markets around the world. Notwithstanding that, the EU, in toto, is still Israel’s second largest trading partner.

The burgeoning trade relationship with China may be slowed by the Trump administration’s stance that Israel’s reliance on Chinese companies (infrastructure construction: railroads, ports, mobile networks) constitutes a danger not only to Israel, but to its close partner, the US. Hence the growing pressure from America to contain China’s increasing inroads into Israel: constructing two Israeli ports, a huge desalination plant (see below), and advanced web infrastructure, especially 5G telecommunications technology. Below are several examples of US pressure on Israel:

Headline: Pompeo warns US could curb security ties with Israel over China relations

Secretary’s statements come as Israel steps up trade and business ties with Beijing, which has made key investments in the Israeli economy, including strategic Haifa port (Times of Israel – March 21, 2019

Pompeo to warn Israel over Chinese involvement in water plant

Secretary of State Mike Pompeo is expected to warn Israel on his Wednesday visit [May 13] against letting a Chinese firm build and operate the biggest seawater desalination plant in the world. Al-Monitor.com – May 11, 2020

China loses bid to build $1.5 billion desalination plant in Israel

Under pressure from the US administration, Israel has chosen a local company over a Chinese one to construct and operate its massive new sewage water desalination plant. Al-Monitor.com – May 26, 2020

The Ministry of Defense recommends against allowing Chinese firms to participate in the construction of 5G mobile telecommunications infrastructure in Israel, Channel 12 News correspondent Nir Dvori reports. May 27, 2020

According to Stephen Kotkin, Professor in History and International Affairs at Princeton University and Senior Fellow at the Hoover Institution, China has a 3-part goal:

To preserve at all costs its Communist Party regime; to achieve hegemony in South Asia; and to stretch its influence westward through Eurasia to the Atlantic Ocean, thereby overtaking the US commercially via its BRI (China’s Belt and Road Initiative). Ultimate goal? To become the world’s greatest superpower.

What tools is China using to implement this goal? First and foremost, China places the Communist Party above its citizens, subordinating the masses to the ‘cause.’ Civil and human rights of individuals mean nothing in China, which allows a minimum of political demonstrations, forbids almost all religious activity, subjugates Tibet’s indigenous people and reportedly has one million Muslim citizens (Uighurs) in ‘re-education’ camps. Right now, China is abrogating its treaty over Hong Kong with Britain, erasing the civil rights of its citizens. The issue of human rights only arises if the West makes one of China’s prominent victims a cause celebre.

China has a mercantilist style economy (see appendix) which involves the Party in all significant businesses, assuring that they follow its dictates. China uses its vast economic power to lend money to many countries to pay for Chinese-constructed infrastructure projects, often taking them over when those nations are unable to repay the loans. Since there is no opposition party allowed, China pursues its goal with no competing initiative. Its power results from its position as ‘the’ major supplier of goods to the world as well as its burgeoning armed forces, growing naval supremacy in the South China Sea, and a vast array of missiles and rockets, including supersonic ones that the US can’t match (yet).

“Last year [2017], the Chinese Navy became the world’s largest, with more warships and submarines than the United States, and it continues to build new ships at a stunning rate. Though the American fleet remains superior qualitatively, it is spread much thinner.

… Last year, China counted 317 warships and submarines in active service, compared with 283 in the United States Navy, which has been essentially unrivaled in the open seas since the collapse of the Soviet Union in 1991.” (https://www.nytimes.com/2018/08/29/)

Despite the many problems facing the US, it is unquestionably Israel’s greatest friend and perhaps the closest country to Israel in many ways. E.g. both nations are Western in political orientation; both would be unwilling to accept a government of only one political party which subordinates the individual to it; both have strong ethical and religious underpinnings to society, despite the fact that the government and legal system are secular. Significantly, America’s founding principles are based on the Bible.  So, when the US warns Israel to pull back from China, Israel will do so. This has happened on several occasions, when Israel backed off from (mostly military) deals with China that were ‘vetoed’ by the US.

The US and other countries must keep China in its sights as a force to be carefully monitored, if not resisted outright. The US is powerful and strong enough to confront China, but only if America continues to have the will, which has been late in coming. A US fallback to a passive acceptance of China’s juggernaut-style and duplicitous methods will only result in the end of US leadership and playing second-fiddle to China.

Reducing trade with China doesn’t mean that Israel’s turn towards the East is over. Increasing trade with countries like Japan, South Korea, Australia, and others can replace a reduction of business with China, which will still want to benefit from Israeli innovation and high tech prowess. Israel will benefit by continuing to open new markets globally under its new government and succeeding ones.

Appendix:

Israel’s largest trading partners 2019

United States: US$16.1 billion (27.5% of total Israeli exports)

China: $4.7 billion (8.1%) / Hong Kong: $3 billion (5.1%) = (13.2%)

United Kingdom: $5 billion (8.5%)

Netherlands: $2.2 billion (3.7%)

India: $2 billion (3.4%)

Turkey: $1.7 billion (2.9%)

Germany: $1.7 billion (2.8%)

Belgium: $1.6 billion (2.8%)

France: $1.5 billion (2.6%)

Brazil: $1.2 billion (2%)

(http://www.worldstopexports.com/israels-top-trading-partners/)

What Is Mercantilism?

Mercantilism was an economic system of trade that spanned from the 16th century to the 18th century. Mercantilism is based on the principle that the world’s wealth was static, and consequently, many European nations attempted to accumulate the largest possible share of that wealth by maximizing their exports and by limiting their imports via tariffs. (investopedia.com)