BDS, Israel, and the EU

The Israeli government is increasingly exercised about BDS, a global movement that began in 2005 and has picked up steam over the past four years. The Israeli government has convened a crisis ministerial team to deal with the situation.  The Israeli Prime Minister and some members of his cabinet have equated all types of boycotts against Israel, including those aimed only at the West Bank settlements, as an expression of anti-Semitism. The Israeli foreign ministry has taken a more nuanced line, distinguishing between BDS’ call for a blanket boycott of all Israeli business and recent moves within the European Union to divest from Israeli enterprises located in or dealing with the Occupied Territories.

The EU has long maintained that the West Bank and East Jerusalem are not part of Israel, and in 2010 the European Court of Justice ruled that Israeli products from the Occupied Territories should not receive preferential customs treatment under the European Community – Israel trade agreement of 2000.  Last year the EU re-affirmed existing guidelines to member states not to engage in activities with or that bring benefit to Israeli enterprises or institutions in East Jerusalem or the West Bank. Yet the EU itself has not imposed sanctions upon Israel; in fact, it was eager to sign Israel on to the Horizon 2020 agreement for cooperative scientific research. As the European Parliament president Martin Schulz said at Hebrew University on Feb 12, “There is no boycott in the European Parliament; there is for sure not a majority for a potential boycott.”

The British Department of Trade and Investment has issued an advisory, warning British businesses against deals with Jewish settlements for fear of “image damage.”  Yet by and large the EU’s member states have taken a cautious line. As Schulz recently told Israel’s Labor Party leader Isaac Herzog, “Israel’s [real] problem is with the [European] business sector.”  In northern Europe private companies and quasi-governmental pension funds have purposefully pursued divestment. The largest Dutch pension fund, APB, has thus far refrained from divestment, but another pension fund, PGGM, divested from Israeli banks earlier this year. Denmark’s largest bank, Danske Bank, has divested from Bank Ha-poalim, and the Norwegian government pension fund’s has divested from all five major Israeli banks. Norwegian and Danish divestment from certain companies, e.g., Israel-Africa Investments, which has construction projects in the settlements, goes back to 2010.

The pension funds’ actions thus far will not have much impact, as their holdings in Israeli financial institutions and companies were only a few tens of millions of Euros.  European investors continue to snap up Israeli government bonds – most recently, 1.5 billion Euros worth on the London stock exchange at beginning of February.

Israel’s real dependence on the EU is not pension fund purchases of Israeli equities but rather exports of goods and services, as the EU is Israel’s largest trading partner.  (A third of Israel’s exports go to Europe, and a third of the country’s imports come from Europe.)  Some of Israel’s leading exports (e.g., industrial diamonds) are unlikely to be affected by increased sanctions, but Israel’s finance minister Yair Lapid cautions that in the unlikely case where existing EU-Israel trade agreements are abrogated the country could lose four billion Euro per year.  Yet so far, trade has suffered very little.  True, Jordan Valley farmers are finding it harder to sell their expensive greenhouse vegetables, which in many European countries are marked as products of the West Bank and thus shunned.  So the peppers are being bought instead by Russia at a lower price.  The price of shares in Sodastream,  which manufactures carbonated water  dispensers and one of whose production facilities is in the West Bank, is down by about 25 per cent.  The company is not likely to go out of business, however – its product is wildly popular, and Scarlett Johansen is its official spokesperson.

The goods produced in the West Bank settlements amount to only about one per cent of Israel’s total industrial product.  A boycott against these goods will do the state of Israel little serious harm.  They will, however, hurt the people who produce them.  Israel has sixteen industrial zones in the West Bank, employing some 21000 workers, two thirds of whom are Palestinian.  They earn about three times the Palestine Authority’s minimum wage and so are not necessarily eager to endorse a boycott of settlement products.

Ultimately, though, the boycott issue is not about economics, but rather about politics.  Supporters of BDS justify the short-term loss of a livelihood for a Palestinian labourer in exchange for the opportunity for the Palestinian people to realize their collective national rights.  In order to appear to be politically progressive, European businesses may be willing to expand the process of divestment from West Bank enterprises and Israeli companies or banks that deal with them.   But it is doubtful that they would boycott Israel altogether. Doing so would have a heavy political cost of its own, and they would lose a lot of money.

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