The Netanyahu Effect: Trade Row with European Union, MENA Summits Suspended

By MacKinnon, Colin | Washington Report on Middle East Affairs, August 1998 | Go to article overview

The Netanyahu Effect: Trade Row with European Union, MENA Summits Suspended


MacKinnon, Colin, Washington Report on Middle East Affairs


The Netanyahu Effect: Trade Row With European Union, MENA Summits Suspended

Despite furious snorts and alarums from the Netanyahu government, the European Commission, the executive body of the European Union, has recommended that the EU go ahead and deny free-trade benefits to products made in Jewish settlements in the West Bank, Gaza, East Jerusalem and the Golan Heights. For years now, Israel has been shipping such goods to the EU labeled "Made in Israel." The Commission claims the Israeli practice is in violation of the 1975 EU-Israeli free trade agreement (the EU doesn't consider territory across the Green Line to be Israeli). The Netanyahu government insists that it is not, that the agreement covers goods made in the settlements.

In mid-May the Commission delivered two memoranda to Israel's Ministry of Industry and Trade and Ministry of Foreign Affairs. One accused Israel of preventing the PA from freely exporting goods. The other raised the issue of products coming into the EU from occupied territory and in effect demanded that Israel set borders for its products and label them honestly. If goods leaving Israeli ports are actually made in what is commonly known as "Israel," say the Europeans, they should be labeled as such. But if they are made, say, in the Golan Heights, they should be so labeled and not be considered eligible for EU trade benefits.

Though the products in dispute are fairly diverse, an estimated 120 or so, total sales to the EU from beyond the Green Line are probably not large -- perhaps $200 million a year at the most, including Palestinian-produced goods.

Both of the two Israeli ministries that received the memoranda rejected them. As of early June, the Council of Europe, the EU's legislative body, had not acted on the Commission's proposal.

A POLITICAL IMPETUS

The real impetus behind the EU decision is political, not economic: it is the growing EU frustration both with the Israeli government of Binyamin Netanyahu and with the unwillingness of the U.S. to use its leverage on Israel.

Since the Oslo accords were signed in 1993, the EU and its member countries have been the largest donors to the Palestinian Authority, pledging $1.85 billion out of total international commitments so far of $2.8 billion.

Since that time, Palestinian GDP has fallen 35 percent -- largely because of Israeliimposed border closures -- and it has been European money that has kept the PA afloat. The Europeans say, however -- and you get some agreement from multilateral agencies such as the World Bank -- that the EU is in effect subsidizing Israeli economic pressure on the Palestinians. If European money were not flowing into the PA, the Israelis would have to face the consequences of even greater Palestinian impoverishment. Among those consequences would be a drop in Israel's $1.5 billion a year in sales to the PA.

Since late last year the EU has also been angling for a larger role in the Middle East peace negotiations, arguing that its preponderant economic weight should give it more say at the table. The EU is also seeking to become the key actor in coordinating donor aid.

EU OUTSPOKENNESS

On May 26 a top-ranking official of the European Commission told the Israeli daily Ha'aretz that political dialogue between the EU and Israel had simply ceased. Manuel Marin, commission vice president for relations with Mediterranean countries, blamed the Netanyahu government's policies toward the Palestinians for making dialogue impossible.

It is Israeli policy under Netanyahu that has caused the EU to raise the question of settler products. …

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