Israel’s Minister of Economy and Industry Orna Barbivai and UAE Minister of Economy Abdulla bin Touq Al Marri present the Free Trade Agreement they signed, which is the first such agreement Israel has with an Arab county, in Dubai, United Arab Emirates May 31, 2022. Anuj Taylor Strap Studios-GPO/Handout via REUTERS

Israel signed a free trade agreement with the United Arab Emirates on Tuesday, its first with an Arab state and one which eliminates most tariffs and aims to lift their annual bilateral trade to more than $10 billion.

It was signed in Dubai by 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 removed or reduced on 96% of goods traded between the nations. The UAE predicted the Comprehensive Economic Partnership Agreement would boost annual bilateral trade to more than $10 billion within five years.

Emirati-Israeli trade stood at $1.2 billion in 2021, official Israeli data showed.

Tariffs will be reduced on goods including food, medicine, diamonds, jewelry, fertilizers and other chemicals.

Most duties are to be eliminated immediately, while others will be removed over 3-5 years. Some products will still be subject to customs tariffs but at a lower rate.

Emirati trade minister Thani Al Zeyoudi said the deal had written “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.

Barbivai said in a statement the expected strengthening in trade, removal of barriers and promotion of new business opportunities and partnerships would form a “solid foundation” for the “joint path” shared by Israel and the UAE.

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, said Dorian Barak, president of the UAE-Israel Business Council .

The council predicts there will be almost 1,000 Israeli companies working in or through the UAE by the end of the year.

“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.

Israel and the UAE established ties in September 2020 in a US-brokered deal that broke with decades of Arab policy that had called for a Palestinian state before ties with Israel.