Israel should keep an eye on Biden's economic policies - opinion

Published: FEBRUARY 1, 2021 21:59

US PRESIDENT Joe Biden signs executive orders in the Oval Office of the White House on Wednesday, after his inauguration as the 46th president of the United States. (photo credit: TOM BRENNER/REUTERS) — US PRESIDENT Joe Biden signs executive orders in the Oval Office of the White House on Wednesday, after his inauguration as the 46th president of the United States.

(photo credit: TOM BRENNER/REUTERS)

Biden’s new executive orders will put additional pressure on Israeli companies that target the US market, mostly in the public sector.

US President Joe Biden took office two weeks ago and his new policies and executive orders are already making waves in the US and internationally. Yet, the Israeli landscape has been over-occupied mainly with the new Biden administration’s different approach toward Iran and the broader Middle East ramifications, such as suspension of certain military deals.

Israel’s corporate leadership, though, should not ignore the major changes introduced by the new American administration with significant opportunities and challenges. While Biden’s executive orders speak to domestic audiences and reflect domestic priorities, their impact here could be far-reaching.

Several of his new policies and executive orders address the climate crisis in the US and around the world. Expanding federal research and development and national labs is one of the critical components of Biden’s new energy agenda. Historically, the US government played a significant role in advancing new technologies that change the energy landscape. The Department of Energy’s efforts in the 1970 led to the US shale boom, and its solar program has led to a rapid growth of cheaper solar energy in the US recently.

Israel has been in the forefront of research and development in energy technologies, such as energy storage, batteries and smart grid, which are now an important part of Biden’s new economic and energy agenda. His first days in office present many Israeli companies with a unique opportunity to collaborate with the US energy sector. Several federal and state-level funding programs will be accelerated.

In addition, a growing number of Israeli institutional investors, such as insurance companies and banks, have been acquiring renewable assets recently in the US in order to expand their alternative assets portfolio, improve performance and returns, and improve their “climate action” track record. Biden’s new policies will accelerate many renewable energy projects in the US, which will provide Israeli investors with additional opportunities in this sector.

Supporting the labor force and the US industrial base is also an important part of Biden’s economic agenda. One of his first and recent executive orders, as part of his “Build Back Better” initiative, tightens “Buy America” requirements for domestic content under consideration. The executive order enhances enforcement efforts, increases domestic content requirements for US goods, and makes it more challenging to obtain waivers by governmental agencies, a common previous practice. Biden also established a new “Made in America” office within the Office of Management and Budget for better monitoring and compliance.

Several Israeli companies have already shifted production to the US, especially in the defense sector, over the last four years in order to adjust to former president Donald Trump’s new onshoring policies. Biden’s new executive orders, such as “Ensuring the Future Is Made in All of America by All of America’s Workers,” will put additional pressure on Israeli companies that target the US market, mostly in the public sector.

US-China relations in recent years also had a direct impact on US-Israel relations and the Israeli economy. Biden indeed already reversed several executive orders signed by Trump. Yet, the rhetoric on China-related matters from his administration does not reflect any dramatic change of policy on Chinese technology and US capital markets, taking into account the bipartisan view in the US Congress on this issue.

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Israeli companies, like many other fast-growing companies globally, have been raising capital in China or have considered doing so in recent years. 54 Israeli tech companies raised $5.7 billion from Chinese investors between 2011 and 2018, according to the Rand Corporation, which was a major financial engine behind Israel’s tech ecosystem this past decade.

Yet, this pace is declining and the Trump administration warned Israeli companies against raising funds from Chinese investors, especially as many of them plan listing on a US exchange. Many of Trump’s China-related executive orders address Chinese companies’ access to US capital markets, and Biden’s policy continuation would accelerate the trend, so many Israeli tech companies will reconsider Chinese funding as they approach the booming US capital markets.

Executive orders, indeed, are not the preferred form of action. They are short lived, can be changed by future administrations, and they are not extensive pieces of legislation passed by a bipartisan support. However, they reflect broader new policies and the regulatory agenda for the new Congress. From trade to energy, from manufacturing to China, the new US administration is quickly pursuing major changes, with broader global and Middle East ramifications.

Israeli companies and politicians should carefully watch.

The writer is an international economic law NYU professor, Duff and Phelps Senior Advisor, and media commentator