Why America and Israel Need Each Other

The argument for a strong relationship between the United States and Israel is usually made in military or diplomatic terms. Those arguments are important, but looking ahead fifty years, one of the most durable connections between the two countries may be their mutual commitment to free enterprise.

America has what Israel cannot reproduce: enormous capital markets, world-leading universities, a continental consumer economy, massive industrial capacity, and the ability to turn an invention into a global product.

Israel offers something different: an extraordinary concentration of scientists, engineers, entrepreneurs, and technology companies in a country of about 10.2 million people. Israel devotes approximately 6.8 percent of its economy to research and development, the highest rate in the OECD. American companies have taken notice. U.S. firms operate a substantial share of the multinational research centers in Israel, particularly in semiconductors, artificial intelligence, cybersecurity, medical technology, and advanced computing.

The United States gains access to a remarkably productive center of technological innovation located in one of the world's most strategically important regions. Israel gains access to American capital, manufacturing capacity, and the world's largest sophisticated consumer market. Ideas developed in Haifa or Tel Aviv can become products financed, manufactured, and sold through American companies. American technology, in turn, can be strengthened by Israeli engineering and research.

The numbers show that this relationship has already moved far beyond foreign aid. U.S.-Israel trade in goods and services reached approximately $54.2 billion in 2025. Their economic relationship has been expanding since 1985, when Israel became the first country with which the United States signed a free-trade agreement. The joint U.S.-Israel BIRD Foundation alone has supported more than 1,200 collaborations between American and Israeli companies, helping generate more than $10 billion in direct and indirect commercial revenues.

Historically, Israel began with a heavily state-controlled and centralized economy influenced by social-democratic ideas. Over the past several decades, however, its transformation into a dynamic "Start-up Nation" has been facilitated by privatization, trade liberalization, deregulation, and a deliberate shift toward freer markets and private enterprise.

The industries likely to play an increasingly important role in economic and military power during the next half-century are precisely those in which the two countries already cooperate: artificial intelligence, cybersecurity, semiconductors, robotics, biotechnology, medicine, missile defense, autonomous systems, water technology, and advanced energy.

Both Israel and the United States are experiencing significant domestic political divisions. Political relationships fluctuate. Prime ministers and presidents change. Coalitions collapse. Public opinion shifts. Congress changes hands. Foreign aid can be increased, reduced, or made politically controversial.

Scientists build careers together. Companies acquire one another. Patents become shared products. American institutional investors and venture-capital firms invest in Israeli companies, while Israeli companies employ Americans. Suppliers, laboratories, research institutions, and manufacturing plants become interconnected. Individual investors may enter or leave the market, but capital continues to flow toward enterprises that investors believe can create long-term value.

Relationships among private companies, investors, scientists, and research institutions can therefore insulate economic cooperation from short-term political fluctuations. As these connections deepen, they become increasingly self-reinforcing. Governments may change and political disagreements may intensify, but policymakers must still reckon with commercial relationships, investments, technological partnerships, and supply chains that span administrations and political parties.

Government nevertheless has an essential role. The United States and Israel must maintain the stable institutional framework within which this private cooperation occurs. That framework includes military cooperation, intelligence sharing, free trade, protection of intellectual property, and predictable rules governing investment and sensitive technologies.

The relationship is not perfectly symmetrical. Israel, as the much smaller country facing immediate regional security threats, derives a more immediate security benefit from American support. The United States, however, also receives substantial benefits through technological collaboration, intelligence cooperation, commercial investment, and access to Israeli innovation. Israel remains a longstanding American security and technology partner in a region of continuing strategic importance.

Looking forward fifty years, a particularly durable U.S.-Israel relationship would be one in which American and Israeli scientists, companies, investors, universities, and manufacturers are so deeply connected that cooperation continues despite temporary political disagreements.