Will UAE-Israel trade deal open the door for other Arab countries?

A further momentous change in Arab-Israeli relations recently took place last month when the UAE and Israel signed a free trade agreement. The pact, the first of its kind between Israel and a Gulf Arab state, will lower tariffs, ease tax rates and facilitate business.

With the agreement in place, there will be more interaction between the two countries – more trade, more business and more travel. Effectively, the norm that existed for almost 50 years after the UAE gained its independence in 1971 – treating Israel and its citizens as a pariah – has been shattered, and will increase pressure on other Arab states to do so as well.

The Israel-UAE free trade agreement is another groundbreaking step in the normalization of ties between Israel and its Arab neighbours, a process that has been ongoing for more than 40 years, until recently with only partial success. A peace treaty was signed with Egypt in the late 1970s, and another with Jordan in 1994 that was followed by the only other free trade agreement with an Arab state in 1995.

But beyond these specific events, the possibility of normalizing relations with the rest of the Arab world was seen for decades as a remote, if not impossible, prospect. The Israel-Palestine conflict and the lingering resentments around the 1967 and 1973 wars made relations between Israel and its neighbours hostile.

This situation began to change owing to two factors. The first was the signing of the Oslo Accords in the mid-1990s that failed to lead to a comprehensive peace agreement but did create the Palestinian Authority and lead to Israeli withdrawal from Gaza. Second, the increasingly shared strategic view between Israel and Arab states in the Gulf that Iran was a grave threat to regional security.

While Palestine remained a sticking point and constant source of tension in Arab-Israeli relations, the existence of a faltering peace process and realization of a shared strategic interest in Iran meant that tentative engagement could take place, often with US encouragement or facilitation. The UAE and Israel, two US allies, sought to find agreement on issues such as the sale of advanced weapons systems to the UAE, despite Washington’s unofficial “qualitative military edge” policy that denied arms sales to Middle Eastern states that might erode Israel’s defence superiority and fostering a tougher US line on Iran amid President Barack Obama’s push for an Iranian nuclear deal.

Given the clandestine nature of these meetings, it was still an abrupt public shift when the Abraham Accords were signed in September 2020 between Israel, Bahrain, the UAE and the US. These agreements stated a desire to normalize relations between Israel and two Arab states and injected new energy into the process. Sudan and Morocco also agreed to normalize relations with Israel within a few months, while rumours have continued to circulate that Saudi Arabia may be considering a similar move.

What the free trade agreement does, therefore, is demonstrate that the initial flurry of investments and activities that followed the Abraham Accords – such as the opening of direct flights and the very public celebration of Hanukkah in Emirati cities – are here to stay.

Inevitably with agreements such as the Abraham Accords, there is a danger that initial enthusiasm wanes as bureaucracy and public opinion act as brakes on further improvement in ties. Meanwhile, Israel has done little to temper its occupation tactics towards Palestinians with the continued building of settlements in the West Bank and East Jerusalem.

But the trade agreement indicates that both Israel and the UAE are determined to solidify the improvement in their relations and deepen their ties. With the agreement, there is now a goal to multiply trade between the two states more than 10-fold in just five years to reach $10 billion. That would place the UAE in the top tier of Israel’s trade partners – only China and the US have traded more with Israel in 2021.

Whether or not such an ambitious goal is reached, it is clear that the UAE and Israel are likely to see rapid growth in trade and business, with more companies setting up shop in each other’s countries, more visitors and more person-to-person interaction. Just last week, Emirates Airlines started daily direct flights from Dubai to Tel Aviv.

The dynamism in the Israel-UAE relationship, though, also highlights how other Arab states are dragging their feet in taking any further steps to improve relations with Israel, while others avoid normalization altogether. Of the 28 countries that still do not recognize Israel, 15 are Arab League states, including Saudi Arabia.

President Joe Biden will almost certainly raise the issue in his visit to the kingdom next month, with Axios suggesting that the White House is preparing a “roadmap to normalization” to pitch to Riyadh.

But it may take more pressure and incentive to get the Saudis to sign on. Even as the UAE leads the way in this process, therefore, the direction and speed of travel of other Arab states is still not clear.