As of May 2025, the EU-Israel trade relationship remains under heightened scrutiny amid ongoing geopolitical developments. The European Union and Israel’s longstanding Association Agreement, which underpins significant economic exchanges, is now facing calls for reassessment from several EU member states due to concerns over Israel’s compliance with international law and human rights obligations. While no EU-wide sanctions have been imposed, individual countries have taken independent actions that are reshaping procurement and trade dynamics. This article explores the current state of EU-Israel trade relations, emerging procurement challenges, and the strategic implications for professionals navigating an increasingly complex geopolitical landscape.
The EU–Israel Association Agreement (effective June 2000) provides the legal basis for deep trade integration. In 2024, Israel ranked as the EU’s 31st largest trading partner (≈0.8% of EU goods trade), while the EU remained Israel’s single largest export market (about 32% of Israel’s total goods trade). Two-way goods trade was €42.6 billion in 2024: EU imports from Israel totaled €15.9 billion (largely machinery, transport equipment and chemicals) and exports to Israel €26.7 billion (similarly dominated by machinery/transport equipment and chemicals). Services trade is also significant: in 2023 bilateral services trade amounted to €25.6 billion (EU imports €10.5 B; exports €15.1 B). These figures underscore the scale of economic interdependence between the EU and Israel.
Key Agreements and Initiatives
Over the years the EU and Israel have built on the Association Agreement with sectoral accords and policy initiatives:
- 2008/2010 – Agriculture. An additional agricultural trade agreement was negotiated in 2008 and entered into force in January 2010, further opening EU markets to Israeli farm products under preferential conditions.
- 2012 – Pharmaceuticals (ACAA). In 2012 the EU and Israel signed an Agreement on Conformity Assessment and Acceptance of Industrial Products (ACAA) covering pharmaceuticals. This mutual recognition arrangement means that each side accepts the other’s drug certification, simplifying trade in medicines.
- 2018 – Open Skies Aviation. A Euro-Mediterranean “Open Skies” Aviation Agreement fully entered into force in 2018, liberalising air transport and increasing connectivity between the EU and Israel.
- 2021 – Trade Policy Review. In February 2021 the EU Trade Policy Review highlighted a new “sustainable investment initiative” for the Southern Neighbourhood. Israel, as part of that region, is a focus for enhanced strategic economic integration under this initiative, reflecting the EU’s broader policy priorities for stability and development around its periphery.
Preferential Trade Rules and Origin Controls
Under the Association Agreement, only products originating in internationally recognised Israeli territory qualify for tariff preferences. Goods produced in Israeli settlements in the West Bank, East Jerusalem or other territories occupied since 1967 do not receive preferential tariff treatment. To enforce this, a 2004 “Technical Arrangement” requires Israeli certificates of origin to list the exact postal code of the production site. The European Commission maintains an official postal-code list of ineligible settlements (last updated June 2023), which customs officials use to identify products from those areas. Importers are explicitly forbidden from claiming EU preferences on items originating in excluded zones.
Since May 2023 the EU has introduced a dedicated customs code (Y864) for imports from Israel. Import declarations for any preferential import under the EU–Israel Agreement must now include code Y864 whenever the goods’ proof of origin indicates production in a territory that is not eligible for tariff reductions. Failure to declare code Y864 causes the system to automatically refuse the preferential tariff (i.e. the goods enter at standard duty). These strengthened origin controls underscore the EU’s commitment to ensuring that only truly Israeli-origin products enjoy the benefits of the agreement.
Growing Political Pressure to Reassess the Agreement
In response to the humanitarian crisis in Gaza, at least eight EU member states, France, Spain, Ireland, the Netherlands, Finland, Portugal, Slovenia, and Sweden, have called for a formal reassessment of the EU-Israel Association Agreement. These calls reflect increasing political and legal scrutiny over Israel’s compliance with its human rights obligations under the accord.
France: Foreign Minister Jean-Noël Barrot reiterated France’s commitment to human rights as a core principle of EU external relations, stating the need to evaluate whether Israel remains in compliance with the Association Agreement.
The Netherlands: Dutch Foreign Minister Caspar Veldkamp publicly questioned the legality of Israel’s ongoing blockade of humanitarian aid to Gaza, warning that such actions may breach both the agreement and international humanitarian law.
Ireland: Ireland has played a prominent role in pressing for a reassessment of the EU-Israel Association Agreement. In February 2024, it formally joined Spain in requesting a review of the agreement, citing serious concerns about potential violations of international humanitarian law. Then Foreign Minister Micheál Martin and later Tánaiste Simon Harris both underscored that respect for human rights is non-negotiable in EU external agreements. Irish representatives also noted that a unanimous decision is not required to trigger a suspension of the agreement, signaling a firm legal and political stance within the Council.
These concerns have prompted the European Commission to initiate internal assessments on whether the formal conditions exist to suspend parts of the agreement, though no official decision has been made as of May 2025.
Emerging Procurement and Trade Restrictions
Although no EU-wide sanctions have been formally adopted, several individual EU states have taken independent actions that directly affect procurement and arms export policy:
France: While France has not exported complete weapons systems to Israel since 1998, it continues to provide dual-use components and parts. President Emmanuel Macron has now publicly supported calls to halt the supply of all military-relevant materials to Israel.
Italy: Italy, historically Israel’s third-largest arms supplier after the US and Germany, suspended all new arms export licences to Israel in late 2023. However, previously approved contracts were still honoured during the conflict, creating legal ambiguities given Italian legislation prohibiting arms exports to nations engaged in war.
Spain: The Spanish government has gone further, suspending existing weapons purchase contracts and denying Israeli military vessels access to Spanish ports. Prime Minister Pedro Sánchez has also advocated for Israel’s exclusion from global cultural events, such as the Eurovision Song Contest.
Ireland: Although Ireland does not maintain direct arms exports to Israel, it has taken a leading diplomatic position in EU discussions. The Irish government has consistently called for enhanced scrutiny of Israeli compliance with international law and has urged the Commission to evaluate trade privileges under the Association Agreement. In response, Israel announced the closure of its embassy in Dublin in December 2024, citing Ireland’s perceived anti-Israel policy, a rare diplomatic rupture within the EU bloc.
These actions, while nationally driven, illustrate a broader EU trend toward tightening scrutiny over defence and dual-use exports to conflict zones.
Strategic Implications for Procurement Professionals
Procurement professionals operating within or in connection with EU jurisdictions must now consider multiple dimensions of risk and compliance arising from these developments:
- Legal Compliance with Trade Agreements
Organisations sourcing goods or services involving Israeli suppliers must track updates to the Association Agreement and prepare for possible regulatory changes, including withdrawal of preferential tariff access or import/export restrictions.
- Ethical and Human Rights Due Diligence
With the EU placing increasing weight on the human rights dimensions of external trade, ethical procurement is no longer a soft consideration. Procurement decisions must account for the social and political impact of supplier relationships, particularly in defence, technology, and infrastructure sectors.
- Supply Chain Risk and Contingency Planning
The potential for sudden policy shifts necessitates dynamic risk assessments. Organisations should proactively identify exposure points in their supply chains and develop contingency plans, including alternative sourcing strategies.
- Supplier Diversification and Regional Risk Mapping
Procurement teams are encouraged to reduce dependency on suppliers from politically sensitive regions. This includes conducting geopolitical risk assessments as part of supplier onboarding and ongoing performance evaluation.
EU Institutional Position, Current Status
As of now, the European Commission has not suspended the EU-Israel Association Agreement, but the review process remains active. Any decision to suspend or revise the agreement would require consensus among EU member states within the Council, informed by a legal finding of breach under Article 2. Such decisions may significantly impact procurement conditions, including market access, regulatory compliance, and legal liability for organisations dealing with Israeli entities.
The current EU-Israel trade and diplomatic landscape shows the need for procurement functions to remain agile, informed, and ethically grounded. The line between political diplomacy and commercial engagement is becoming increasingly thin, especially where human rights considerations are in play.
Sources:
Growing call from EU states to review EU trade deal with Israel – The Irish Times
France backs reviewing EU relations with Israel over human rights violations – Middle East Eye
Spain’s PM wants Israel out of international cultural events over Gaza war – Reuters
EU to discuss suspending association agreement with Israel over Gaza humanitarian crisis – Turkiye Today
EU trade relations with Israel. Facts, figures and latest developments. – European Commission
